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Transcript
Product Booklet dated 22 July 2011
C-45
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED
C-1(a)
(a company incorporated in Hong Kong with limited liability,
a licensed bank regulated by the Hong Kong Monetary Authority and registered under the
Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) for Types 1, 2, 4, 5 and 6
regulated activities)
as Issuer
Product Booklet
for
Non-Principal Protected Unlisted Daily Cash Dividend
Callable Equity Linked Investments
Linked to a Basket of Securities (Basket DCDC ELIs)
Arranger to the non-principal protected unlisted equity linked investment programme (Programme)
C-1(b)
The Hongkong and Shanghai Banking Corporation Limited
Our Basket DCDC ELIs are NOT equivalent to time deposits and are NOT principal
protected. They are structured investment products embedded with derivatives. You may
sustain a total loss in your investment.
If you are in any doubt about any of the contents of the Basket DCDC ELI offering documents,
you should seek independent professional advice.
The Securities and Futures Commission (SFC) has authorised our Basket DCDC ELIs under
Section 104A(1) of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong)
(SFO) and the issue of this product booklet and the term sheet based on the standard format
set out in Appendix A to this product booklet as part of the offering documents for our Basket
DCDC ELIs under Section 105(1) of the SFO.
The SFC takes no responsibility for our Basket DCDC ELIs or the contents of this product
booklet, makes no representation as to its accuracy or completeness and expressly disclaims
any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or
any part of the contents of this product booklet. The SFC’s authorisation does not imply
SFC’s endorsement or recommendation of our Basket DCDC ELIs referred to in this product
booklet, nor does it imply that the SFC guarantees the commercial merits of our Basket
DCDC ELIs or their performance. The SFC’s authorisation does not mean our Basket DCDC
ELIs are suitable for all investors nor is it an endorsement of their suitability for any
particular investor or class of investors. Interested persons should consider obtaining
independent professional advice before investing in our Basket DCDC ELIs.
C-33
IMPORTANT
You are warned that the market value of our Basket DCDC ELIs may fluctuate and you may sustain a total
loss of your investment. You should therefore ensure that you understand the nature of our Basket DCDC
ELIs and carefully study the risk warnings set out in this product booklet and other Basket DCDC ELI
offering documents and, where necessary, seek independent professional advice, before you invest in our
Basket DCDC ELIs.
C-34(a)
The offering documents for our Basket DCDC ELIs include particulars given in compliance with the Code
on Unlisted Structured Investment Products issued by the SFC (the “Code”) for the purpose of giving
information with regard to The Hongkong and Shanghai Banking Corporation Limited (“HSBC”), our
Basket DCDC ELIs and our Programme. HSBC accepts full responsibility for the contents of, and the
completeness and accuracy of the information contained in the Basket DCDC ELI offering documents and
confirms, having made all reasonable enquiries, that to the best of its knowledge and belief there is no
untrue or misleading statement, or other facts the omission of which would make any statement herein
untrue or misleading. HSBC also confirms that it meets the applicable eligibility requirements under the
Code and the Basket DCDC ELIs comply with the Code.
C-34(b)
Our Basket DCDC ELIs constitute general, unsecured and unsubordinated contractual obligations of
HSBC (as the issuer) and of no other person. If you invest in our Basket DCDC ELIs, you are relying upon
HSBC’s creditworthiness and have no rights under the terms of the Basket DCDC ELIs against the issuers
of the reference assets.
Post-sale cooling-off period pursuant to Part IV of the Code applies to our Basket DCDC ELIs with
an investment period of more than one year. For further details, please refer to pages 123 to 124 of
this product booklet.
A Chinese version of this product booklet is also available from the distributor(s) and/or from the offices
of The Hongkong and Shanghai Banking Corporation Limited at Level 15, HSBC Main Building, 1
Queen’s Road Central, Hong Kong.
C-37
本產品手冊的中文版本可於分銷商及/或香港上海滙豐銀行有限公司之辦事處(地址為香港皇后大道
中1號滙豐總行大廈15樓)索取。
CONTENTS
Page
KEY FACTS STATEMENT (A) — NON-PRINCIPAL PROTECTED UNLISTED DAILY CASH
DIVIDEND CALLABLE EQUITY LINKED INVESTMENTS LINKED TO A BASKET OF
SECURITIES (BASKET DCDC ELIS) WITH DAILY AUTOCALL CONDITION AND NO
KNOCK-IN FEATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
KEY FACTS STATEMENT (B) — NON-PRINCIPAL PROTECTED UNLISTED DAILY CASH
DIVIDEND CALLABLE EQUITY LINKED INVESTMENTS LINKED TO A BASKET OF
SECURITIES (BASKET DCDC ELIS) WITH DAILY AUTOCALL CONDITION AND DAILY
KNOCK-IN FEATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14
KEY FACTS STATEMENT (C) — NON-PRINCIPAL PROTECTED UNLISTED DAILY CASH
DIVIDEND CALLABLE EQUITY LINKED INVESTMENTS LINKED TO A BASKET OF
SECURITIES (BASKET DCDC ELIS) WITH DAILY AUTOCALL CONDITION AND
AT-EXPIRY KNOCK-IN FEATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24
KEY FACTS STATEMENT (D) — NON-PRINCIPAL PROTECTED UNLISTED DAILY CASH
DIVIDEND CALLABLE EQUITY LINKED INVESTMENTS LINKED TO A BASKET OF
SECURITIES (BASKET DCDC ELIS) WITH PERIODIC AUTOCALL CONDITION AND NO
KNOCK-IN FEATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34
KEY FACTS STATEMENT (E) — NON-PRINCIPAL PROTECTED UNLISTED DAILY CASH
DIVIDEND CALLABLE EQUITY LINKED INVESTMENTS LINKED TO A BASKET OF
SECURITIES (BASKET DCDC ELIS) WITH PERIODIC AUTOCALL CONDITION AND
DAILY KNOCK-IN FEATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44
— 2 —
Page
KEY FACTS STATEMENT (F) — NON-PRINCIPAL PROTECTED UNLISTED DAILY CASH
DIVIDEND CALLABLE EQUITY LINKED INVESTMENTS LINKED TO A BASKET OF
SECURITIES (BASKET DCDC ELIS) WITH PERIODIC AUTOCALL CONDITION AND
AT-EXPIRY KNOCK-IN FEATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
54
RISK WARNINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64
HYPOTHETICAL EXAMPLES FOR BASKET DCDC ELIS WITHOUT KNOCK-IN FEATURE . . .
74
HYPOTHETICAL EXAMPLES FOR BASKET DCDC ELIS WITH KNOCK-IN FEATURE . . . . . .
83
OUR BASKET DCDC ELIS — EXTRAORDINARY UNFORESEEABLE EVENTS AND
ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
93
HOW DO OUR BASKET DCDC ELIS WORK? — A FLOWCHART DESCRIPTION . . . . . . . . . . 100
GLOSSARY — THE MEANING OF THE KEY TERMS OF OUR BASKET DCDC ELIs . . . . . . . 103
MORE INFORMATION ABOUT DELIVERY OF THE PHYSICAL SETTLEMENT AMOUNT . . . 119
MORE INFORMATION ABOUT OUR BASKET DCDC ELIS . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
APPENDIX A — FORM OF INDICATIVE TERM SHEET FOR THE BASKET DCDC ELIS . . . . . 129
APPENDIX B — GENERAL TERMS AND CONDITIONS OF THE BASKET DCDC ELIS . . . . . . 145
APPENDIX C — FORM OF PRICING SUPPLEMENT FOR THE BASKET DCDC ELIS . . . . . . . 167
— 3 —
Key Facts Statement (A)
C-6
Non-Principal Protected Unlisted Daily Cash Dividend Callable Equity Linked
Investments Linked to a Basket of Securities (Basket DCDC ELIs) with Daily Autocall
Condition and No Knock-in Feature
issued by
The Hongkong and Shanghai Banking Corporation Limited (HSBC)
We may issue six variations of Basket DCDC ELIs. This key facts statement only provides you with the key information
about one variation of Basket DCDC ELIs that we may issue: Basket DCDC ELIs with daily autocall condition. The
knock-in feature does not apply to this variation of Basket DCDC ELIs.
This key facts statement does not contain all the information that may be important to you as an investor in our Basket
DCDC ELIs and your investment decision should not be made solely on the basis of the information contained in this
key facts statement. You should read the remaining sections of this product booklet (in particular, the section headed
“Risk Warnings”) and the other Basket DCDC ELI offering documents before deciding whether to invest in our Basket
DCDC ELIs.
If you are in any doubt about any of the contents of the Basket DCDC ELI offering documents, you should obtain
independent professional advice.
IMPORTANT RISK WARNINGS
●
Structured Investment Product
Our Basket DCDC ELIs are NOT equivalent to time deposits. They are structured investment products which are
embedded with derivatives.
●
Not Principal Protected
Our Basket DCDC ELIs are not principal protected: you could lose all of your investment.
●
Limited Maximum Potential Gain; you may not receive any potential cash dividend amount
The maximum potential gain under this product is capped at the maximum periodic potential cash dividend
amount(s) payable during the scheduled tenor (i.e. the period from (and including) the issue date to (and including)
the settlement date) of the Basket DCDC ELIs (less any cash settlement expenses). It is possible that you may not
receive any potential cash dividend amount for the entire scheduled tenor of the Basket DCDC ELIs.
●
Potential Payout determined by the Worst Performing Asset
The potential payout under our Basket DCDC ELIs is linked to the performance of the worst performing asset in
the basket (determined by us on each trading day based on the closing price of each reference asset in the basket
on such day). The worst performing asset on each trading day can be different. It will not matter how well the other
reference assets in the basket perform: the potential payout on our Basket DCDC ELIs is always determined by the
asset which performs worst out of all the reference assets in the basket.
●
No Collateral
Our Basket DCDC ELIs are not secured on any of our assets or any collateral.
●
Limited Market Making Arrangements
Our Basket DCDC ELIs are designed to be held to their expiry date. We (as market agent) will provide limited
market making arrangements on a bi-weekly basis for all our Basket DCDC ELIs. If you try to sell your Basket
DCDC ELIs before expiry, you may receive an amount which is substantially less than the original amount invested.
●
Not the same as Investing in the Reference Assets
Investing in our Basket DCDC ELIs is not the same as investing in the reference assets. Changes in the market price
of the reference assets may not lead to a corresponding change in the market value of, or your potential payout
under, the Basket DCDC ELIs.
— 4 —
C-34(c)
●
Re-investment Risk
Our Basket DCDC ELIs contain an autocall condition. If the autocall condition is satisfied, the Basket DCDC ELIs
will be terminated before expiry and no further potential cash dividend amount will be payable following
termination. You may not be able to enjoy the same rate of return if you re-invest in other investments with similar
risk parameters.
●
Not Covered by Investor Compensation Fund
Our Basket DCDC ELIs are not listed on any stock exchange and are not covered by the Investor Compensation
Fund.
●
Maximum Loss upon HSBC’s Default or Insolvency
Our Basket DCDC ELIs constitute general, unsecured and unsubordinated contractual obligations of HSBC as
issuer, and of no other person (including the ultimate holding company of our group, HSBC Holdings plc). When
you buy our Basket DCDC ELIs, you will be relying on HSBC’s creditworthiness. If HSBC becomes insolvent or
defaults on its obligations under the Basket DCDC ELIs, in the worst case scenario, you could lose all of your
investment.
●
English version of the terms and conditions prevails over Chinese version
For the purpose of lodgement with the relevant clearing system(s), the global certificate representing a series of
Basket DCDC ELIs and the terms and conditions of the Basket DCDC ELIs are issued in the English language only.
If there is any inconsistency between the Chinese version of the terms and conditions of our Basket DCDC ELIs and
the English version, the English version will prevail over the Chinese version. If you do not understand the English
version, you should obtain independent professional advice.
●
Exposure to risk from trade date
You should note that as all the commercial variables of our Basket DCDC ELIs are determined on the trade date,
you will be subject to the terms and conditions of our Basket DCDC ELIs from the trade date and you will be
exposed to the market risk and the price movement of the reference assets from the trade date which may affect the
market value of the Basket DCDC ELIs.
●
Conflicts of Interest
You should note that potential and actual conflicts of interest may arise from the different roles played by us and
our subsidiaries and affiliates in connection with our Basket DCDC ELIs.
●
You do not have direct contractual rights to enforce our Basket DCDC ELIs
You do not have direct contractual rights against us as the issuer to enforce our Basket DCDC ELIs. To assert your
rights as an investor in our Basket DCDC ELIs, you will have to rely on your distributor (directly or indirectly via
its custodian) to take action on your behalf. If your distributor fails to take action in accordance with your
instructions or if your distributor’s custodian fails to take action in accordance with the instructions of your
distributor, or your distributor or its custodian becomes insolvent or defaults on its obligations, you will need to take
action against your distributor in accordance with the terms of arrangement between you and your distributor.
C-34(d)
Commissions:
We may pay a commission to the distributor(s). Distributor(s)’ commissions and other transaction costs including our cost
of hedging are factored into the original issue price of the Basket DCDC ELIs.
What are Basket DCDC ELIs with Daily Autocall Condition and no Knock-in Feature?
A.
Overview
●
Basket DCDC ELIs are structured investment products which contain an embedded conditional put option over the
reference assets in the basket. If you purchase a Basket DCDC ELI, you will be selling a conditional put option
over the reference assets in the basket to us. If certain conditions are met, you will be obliged to buy the worst
performing asset on the expiry date from us at its exercise price (as further described in the sub-section headed “E.
At Expiry” below).
— 5 —
C-2(b)(c)
(d)(f)
●
Payout under the Basket DCDC ELIs is linked to the price performance of the worst performing asset in the basket.
The basket of reference assets may comprise a minimum of two and a maximum of six shares in companies and/or
units of funds listed on the Hong Kong Stock Exchange and quoted in Hong Kong dollars. Not all Hong Kong-listed
shares or funds can be used as a reference asset, you should check with your distributor what kind of reference assets
are available.
●
Our Basket DCDC ELIs will be denominated and settled in Hong Kong dollars, United States dollars or other
non-restricted and freely convertible currencies as specified in the relevant term sheet. If the settlement currency of
the Basket DCDC ELIs is different from Hong Kong dollars (being the currency in which the reference assets trade),
we will convert one currency into another at the exchange rate as specified in the relevant term sheet in making
calculations under the Basket DCDC ELIs (if applicable).
●
You can buy a Basket DCDC ELI at its issue price, which is equal to the nominal amount of the Basket DCDC ELI.
The nominal amount of a Basket DCDC ELI is equivalent to the face amount of the Basket DCDC ELI and will be
specified in the relevant term sheet. The minimum investment amount is HKD100,000 (or its equivalent in foreign
currency).
●
The key features of our Basket DCDC ELIs with daily autocall condition and no knock-in feature are set out below:
Basket DCDC ELIs with:
A. Potential Cash Dividend Amount
Daily Autocall Condition and no Knock-in Feature
May receive potential periodic cash dividend amount
if certain conditions are met
Daily autocall condition applies
Not applicable
B. Autocall Condition
C. Knock-in Event
●
You should note that while you place your Basket DCDC ELI purchase order(s) during the offer period, all of the
commercial variables in relation to the reference assets (including the initial spot prices, the exercise prices, the call
prices and the floor prices of the reference assets) that are used to determine the payout of your Basket DCDC ELI
will only be recorded and determined on the trade date after you have purchased the Basket DCDC ELI. The initial
spot price of a reference asset is either (i) the closing price of that reference asset on the trade date or (ii) the
prevailing market price of that reference asset as quoted by the Hong Kong Stock Exchange at the time your Basket
DCDC ELI purchase order is executed on the trade date. A contract note prepared by your distributor containing all
the finalised commercial terms that apply to your Basket DCDC ELI will be sent to you by your distributor within
2 Hong Kong business days after the trade date.
B.
How to determine the worst performing asset?
●
The price performance of the worst performing asset in the basket will determine (i) whether the daily autocall
condition has been met; and (ii) the total payout under our Basket DCDC ELIs.
The reference asset in the basket with the lowest “performance” on a particular trading day will be the worst
performing asset for that trading day. The worst performing asset on each trading day can be different. We will use
the following formula to determine the “performance” for each reference asset on a trading day:
Performance =
Closing price of the reference asset on a trading day
Initial spot price of the reference asset
x 100%
If there is more than one reference asset with the same lowest “performance” on a particular trading day, we will,
in our sole and absolute discretion acting in good faith and in a commercially reasonable manner, decide which one
is the worst performing asset for that trading day.
C.
Payment of Potential Cash Dividend Amount(s)
●
The relevant term sheet will specify whether the potential cash dividend amount for a calculation period is:
(i)
a variable amount calculated according to the variable accrual formula (see “Variable Potential Cash Dividend
Amount” below); or
(ii)
a fixed amount (see “Fixed Potential Cash Dividend Amount” below).
— 6 —
C-2(i)
●
You should note that it is possible that you may not receive any potential cash dividend amount for the entire
scheduled tenor of the Basket DCDC ELIs.
●
Variable Potential Cash Dividend Amount
If the potential cash dividend amount for a calculation period is specified in the term sheet to be a variable amount,
we will determine whether such variable potential cash dividend amount is payable by reference to the price
performance of the worst performing asset in the basket on each trading day. The variable potential cash dividend
amount will be calculated according to the following variable accrual formula:
x
Days in
Total days
(II) Nominal amount x Day-out cash dividend rate x
Days out
Total days
(I) Nominal amount x
Day-in cash dividend rate
PLUS
‘Days in’ means the total number of trading days in a calculation period on which the closing price of the worst
performing asset (determined by us on each trading day based on the closing price of each reference asset in the
basket on such day) is at or above its floor price.
‘Days out’ means the total number of trading days in a calculation period on which the closing price of the worst
performing asset (determined by us on each trading day based on the closing price of each reference asset in the
basket on such day) is below its floor price.
‘Total days’ mean the total number of trading days in a calculation period.
The floor price of each reference asset is set at a specified percentage of its initial spot price and will be set out in
the relevant term sheet. The specified percentage used to calculate the floor price of each reference asset for each
relevant trading day during all of the calculation periods will be the same.
The day-in cash dividend rate and the day-out cash dividend rate will be specified in the relevant term sheet. The
day-out cash dividend rate can be set at zero.
●
Fixed Potential Cash Dividend Amount
If the potential cash dividend amount for a calculation period is specified in the term sheet to be a fixed amount,
such fixed potential cash dividend amount is payable regardless of the price performance of the reference assets in
the basket. The fixed potential cash dividend amount will be calculated according to the following formula:
Nominal amount x Fixed cash dividend rate
D.
Daily Autocall Condition
●
The daily autocall condition is satisfied if the closing price of the worst performing asset is at or above its call price
on a call date, which is set as each trading day (excluding the expiry date) during a relevant period as set out in the
relevant term sheet.
●
The call price of each reference asset is set at a specified percentage of its initial spot price and will be set out in
the relevant term sheet. The specified percentage used to calculate the call price of each reference asset on each call
date will be the same. The call price may be set at a level which is higher than, equal to or lower than the exercise
price.
●
If the daily autocall condition is satisfied on a call date, we will terminate the Basket DCDC ELIs on that call date.
You will receive on the early settlement date (being the 3rd business day after that call date) the nominal amount
of the Basket DCDC ELIs and any accrued potential cash dividend amount calculated up to (and including) that call
date (less any cash settlement expenses).
— 7 —
E.
At Expiry
●
If the daily autocall condition is not satisfied on any of the relevant call dates and the Basket DCDC ELIs have not
otherwise been early terminated, we will determine the final settlement payout under the Basket DCDC ELIs on the
expiry date. For this variation of Basket DCDC ELIs, the final settlement payout will depend on:
C-2(i)
(i)
the amount of any accrued potential cash dividend amount payable for the final calculation period (see also
“C. Payment of Potential Cash Dividend Amount(s)” above); and
(ii)
the closing price of the worst performing asset on the expiry date compared to its exercise price AND its call
price.
●
The exercise price of each reference asset may be expressed as a specified percentage of its initial spot price or in
a range of percentages of its initial spot price (such range will be no wider than Ⳳ2.5%) in the relevant term sheet.
The specified percentage (or if applicable, range of percentages) used to calculate the exercise price of each
reference asset will be the same.
●
If the closing price of the worst performing asset on the expiry date is at or above EITHER its exercise price OR
its call price, we will pay you on the settlement date (being the 3rd business day after the expiry date) a cash amount
equal to the nominal amount of the Basket DCDC ELIs and any accrued potential cash dividend amount for the final
calculation period (less any cash settlement expenses).
●
If the closing price of the worst performing asset on the expiry date is below BOTH its exercise price AND its call
price, the conditional put option will be exercised by us at expiry of the Basket DCDC ELIs and you will receive
on the settlement date (being the 3rd business day after the expiry date) either:
(i)
if you have elected for physical settlement — physical delivery of a number of the worst performing asset on
the expiry date (being the physical settlement amount) after payment of all physical settlement expenses
(please refer to page 115 for details of how the physical settlement amount is calculated) and a cash payment
for any fractional shares or units of the worst performing asset on the expiry date (please refer to page 116 for
details of how this amount is calculated); or
(ii)
if you have elected for cash settlement — payment of an amount equal to the cash equivalent of the physical
settlement amount (less any cash settlement expenses) (please refer to page 116 for details of how the cash
equivalent of the physical settlement amount is calculated).
You will also receive on the settlement date any accrued potential cash dividend amount for the final calculation
period.
You should note that where the conditional put option is exercised by us, you will be obliged to buy the worst
performing asset on the expiry date from us at its exercise price. In this case, you will suffer a loss if the
market value of the physical settlement amount (together with any fractional shares or units of the worst
performing asset on the expiry date) (in both cases calculated based on the closing price of the worst
performing asset on the expiry date) or the cash equivalent of the physical settlement amount, together with
any potential cash dividend amount(s) paid during the scheduled tenor of the Basket DCDC ELIs, is less than
the original amount invested. In an extreme case, you will not receive any potential cash dividend amount for
the entire scheduled tenor and the physical settlement amount or its cash equivalent could be worth nothing
and you could lose all of your investment.
You should also note that, if you elect for physical settlement, the physical settlement amount will only be
delivered to you on the settlement date. Therefore, you will be exposed to any movement in the market price
of the worst performing asset on the expiry date during the period between the expiry date and the settlement
date. If you choose not to sell such worst performing asset on the settlement date, you will be exposed to the
market risk of holding such worst performing asset.
●
You should note that your payout under the Basket DCDC ELIs will be reduced by any distributor’s charges and any
cash settlement expenses or physical settlement expenses payable by you at expiry of the Basket DCDC ELIs.
— 8 —
Worst Case Scenario
The hypothetical example below does not reflect a complete analysis of all possible gain or loss scenarios. You must
not rely on it as an indication of the price performance of the reference assets in the basket or the payout on the Basket
DCDC ELIs.
The example below illustrates the worst case scenario where the worst performing asset in the basket of two reference
assets performs poorly during the investment period of the Basket DCDC ELIs.
Performance of reference assets (%)
C-19
125
Call Price (% of initial spot price)
100
Exercise Price; Floor Price (% of initial spot price)
75
50
25
Investment period
0
Trade Date
1st Calculation Period
End Date/1st Call Date
2nd Calculation Period
End Date
3rd Calculation Period
End Date
4th Calculation Period
End Date/Expiry Date
Call Dates
(each trading day from (and including) the 1st calculation period end date to (and
excluding) the expiry date)
Performance of reference asset 1 (% of initial spot price)
Performance of reference asset 2 (% of initial spot price)
According to the above diagram, reference asset 2 is the worst performing asset in the basket throughout the investment
period (i.e. the period from and including the trade date to and including the expiry date) of the Basket DCDC ELIs.
The above example illustrates the following:
(i)
Potential Cash Dividend Payout
The potential cash dividend amount is (a) fixed for the 1st calculation period and (b) variable for each of the 2nd to the
4th calculation periods. You will receive the fixed potential cash dividend amount for the 1st calculation period regardless
of the price performance of the reference assets in the basket. Since the worst performing asset (i.e. reference asset 2)
closes below its floor price on each of the trading days from the 2nd to the 4th calculation periods, you will receive the
variable potential cash dividend amount (calculated by reference to the day-out cash dividend rate) for each of the 2nd
to the 4th calculation periods.
(ii)
Daily Autocall Condition Not Satisfied
The call dates are set as each trading day during the period from (and including) the 1st calculation period end date to
(and excluding) the expiry date. Since the worst performing asset (i.e. reference asset 2) closes below its call price on each
call date, the daily autocall condition is not satisfied and the Basket DCDC ELIs will not be early terminated.
— 9 —
(iii) At Expiry
Since the worst performing asset (i.e. reference asset 2) closes below its exercise price and its call price on the expiry date,
you will receive on the settlement date either physical delivery of the physical settlement amount (together with a cash
payment for any fractional shares or units of the worst performing asset) or payment of the cash equivalent of the physical
settlement amount. In this case, you will suffer a loss if the market value of the physical settlement amount (together with
any fractional shares or units of the worst performing asset) (in both cases calculated based on the closing price of the
worst performing asset on the expiry date) or the cash equivalent of the physical settlement amount, together with any
potential cash dividend amount(s) paid during the scheduled tenor of the Basket DCDC ELIs is less than the original
amount invested.
You should note that the above example assumes that the potential cash dividend amount is fixed for the 1st
calculation period, in which case you will receive such fixed potential cash dividend amount regardless of the price
performance of the reference assets in the basket. However, if the potential cash dividend amount is variable for
all of the calculation periods during the investment period of the Basket DCDC ELIs, it is possible that you may
not receive any potential cash dividend amount for the entire scheduled tenor. In an extreme case, you will not
receive any potential cash dividend amount for the entire scheduled tenor and the physical settlement amount or
its cash equivalent could be worth nothing and you could lose all of your investment.
Mode of Settlement at Expiry
When you place your purchase order for the Basket DCDC ELIs, you will need to specify whether you elect for cash
settlement or physical settlement upon expiry of your Basket DCDC ELIs in the case where the closing price of the worst
performing asset on the expiry date is below its exercise price and its call price. You can change your election at any time
no later than 4:00 p.m. on the 3rd Hong Kong business day before the expiry date. Please ask your distributor for details.
Adjustment to the terms and conditions and early termination of our Basket DCDC ELIs
Upon the occurrence of certain adjustment events (such as a potential adjustment event, a merger event or a tender offer)
affecting a reference asset in the basket, we can adjust some of the terms of our Basket DCDC ELIs (including adjusting
the exercise price, the call price and the floor price of the affected reference asset) to account for that event so as to
preserve the economic equivalence of the Basket DCDC ELIs. If we determine that any adjustment to the terms of the
Basket DCDC ELIs is not appropriate to account for the relevant merger event or tender offer and to preserve the
economic equivalence of the Basket DCDC ELIs, we will seek to substitute the affected reference asset with another
reference asset in accordance with the terms and conditions of our Basket DCDC ELIs and make any further adjustments
to the terms of the Basket DCDC ELIs as we think fit (acting in good faith and in a commercially reasonable manner)
to account for the relevant merger event or tender offer. If we determine that substitution is not appropriate, we will early
terminate our Basket DCDC ELIs in accordance with the terms and conditions of our Basket DCDC ELIs.
Upon the occurrence of certain termination events (such as an insolvency or a delisting) affecting a reference asset in the
basket, we will seek to substitute the affected reference asset with another reference asset in accordance with the terms
and conditions of our Basket DCDC ELIs and make any further adjustments to the terms of the Basket DCDC ELIs as
we think fit (acting in good faith and in a commercially reasonable manner) to account for the relevant termination event.
If we determine that substitution is not appropriate, we will early terminate our Basket DCDC ELIs in accordance with
the terms and conditions of our Basket DCDC ELIs.
Upon the occurrence of certain market disruption events, we can postpone some of the key dates relevant to the terms of
our Basket DCDC ELIs. Any adjustments or substitution or early termination will be determined by us in our sole and
absolute discretion acting in good faith and in a commercially reasonable manner. Please refer to the summary table on
pages 93 to 99 of this product booklet for further details.
— 10 —
What charges do I have to pay?
Cash Settlement Expenses — If a settlement amount in cash is payable, you will have to pay for any expenses incurred
by us in connection with making the payment of the settlement amount in cash to you, including, for example, any taxes
and duties arising from the expiry of the Basket DCDC ELIs. Currently there are no such expenses. If such expenses are
payable in the future, we will notify the distributor(s) who will in turn inform you in advance.
Physical Settlement Expenses — Before the physical settlement amount is delivered to you on the settlement date, you
will have to pay for all out-of-pocket expenses relating to the transfer and receipt of the physical settlement amount,
including buyer’s stamp duty, transaction levies, registration charges and any other charges levied by your distributor (see
also “Distributor’s charges” below).
Distributor’s charges — Your distributor may charge you fees (including any charges for opening and maintaining a
securities account or an investment account with the distributor and any handling fee in relation to the Basket DCDC
ELIs). Please contact your distributor for details.
Cash settlement expenses, physical settlement expenses and distributor’s charges will affect the potential gain or
loss you get on your investment.
How can I buy the Basket DCDC ELIs?
If you would like to buy our Basket DCDC ELIs, you will have to place your Basket DCDC ELI purchase order with your
distributor. You can contact the appointed distributor(s) to enquire about the Basket DCDC ELIs on offer and the
application procedures. Your distributor will inform you of the purchase consideration (being the issue price) and any
applicable charges.
Once you place your Basket DCDC ELI purchase order with your distributor on the order date, you are committed to
purchase the Basket DCDC ELIs unless the post-sale cooling-off period is applicable (see section below on “Is there a
post-sale cooling-off period for our Basket DCDC ELIs?”) or you have cancelled your order within the specified period
of time as notified by your distributor following the publication of an updated programme memorandum and/or an
addendum to the programme memorandum and/or this product booklet during the offer period after you have placed your
order.
Your purchase order will be executed by us on the trade date and your distributor will pay the purchase consideration
(being the issue price) to us on your behalf on the issue date (being 6 to 10 business days after the trade date). Please
contact your distributor for details on how and when you have to pay the issue price to your distributor. A contract note
prepared by your distributor containing all the finalised commercial terms will be sent to you by your distributor within
2 Hong Kong business days after the trade date.
Is there a post-sale cooling-off period for our Basket DCDC ELIs?
Basket DCDC ELIs with an investment period of more than one year
If you have purchased a Basket DCDC ELI with an investment period (i.e. the period from (and including) the trade date
to (and including) the expiry date) of more than one year, you can choose to cancel or unwind the whole (and not part
of) your Basket DCDC ELI purchase order during the period from (and including) the date you place your purchase order
to (and including) the 5th Hong Kong business day after that date (this period is referred to as the “post-sale cooling-off
period”) by submitting your instructions to your distributor between 10:00 a.m. and 12:00 noon on any Hong Kong
business day during the post-sale cooling-off period.
If you submit your instructions to cancel your Basket DCDC ELI purchase order to your distributor before your Basket
DCDC ELI purchase order has been executed on the trade date, your distributor will not pay the issue price to us on your
behalf on the issue date. If you submit your instructions to unwind your Basket DCDC ELI purchase order to your
distributor after your Basket DCDC ELI purchase order has been executed on the trade date, your distributor will pay the
issue price to us on your behalf on the issue date and we will pay your distributor a cash amount equal to the issue price
less any market value adjustments on the later of: (i) the 3rd business day after the day you submit your instructions to
unwind your Basket DCDC ELI purchase order; or (ii) the issue date.
— 11 —
C-2(o)
In both cases, your distributor may charge you a handling fee when you cancel or unwind your Basket DCDC ELI
purchase order and (if applicable) such handling fee will be deducted from the cash amount returned to you. Please check
with your distributor for further details of when you will receive such cash amount from your distributor. The cash
amount returned to you may be substantially less than the original amount invested. In either case, the distributor’s
commission (if any) will not be deducted from the issue price or cash amount returned to you.
Basket DCDC ELIs with an investment period of one year or less
Please note that your right to cancel or unwind your Basket DCDC ELI purchase order during the post-sale cooling-off
period DOES NOT apply to Basket DCDC ELIs with an investment period of one year or less.
Is there any market making arrangement for your Basket DCDC ELIs before expiry?
C-39
Our Basket DCDC ELIs are not listed on any stock exchange. We (as market agent) will provide limited market making
arrangements for all our Basket DCDC ELIs (regardless of the length of the investment period and the scheduled tenor)
on each market making day falling every other Tuesday after the issue date up to the 3rd Hong Kong business day before
the expiry date. On each market making day, we (as market agent) will provide (via the distributor(s)): (i) indicative bid
prices (on a per-Basket DCDC ELI basis) during normal business hours; and (ii) a firm bid price (on a per-Basket DCDC
ELI basis) upon your request, provided that such request is submitted to your distributor between the opening of the
morning session of the Hong Kong Stock Exchange and the close of the morning session of the Hong Kong Stock
Exchange on such market making day. You may choose to sell part of or the entire holding of your Basket DCDC ELIs
provided that the minimum sell back order is equal to one Basket DCDC ELI and the total amount of Basket DCDC ELIs
you wish to sell is an integral number.
The indicative bid prices will be determined by us taking into account certain factors as set out on page 125 of this product
booklet. The indicative bid prices are provided for your reference only as they will be subject to intra-day change and may
not be the same as the firm bid price at which we are willing to buy back your Basket DCDC ELIs. Upon your request
for a firm bid price, we (as market agent) will determine such firm bid price based on the indicative bid price and the
prevailing market conditions at the time of your request. We will notify your distributor of such firm bid price and your
distributor will in turn inform you. You should note that the firm bid price provided to you by your distributor will
only be valid for a limited period of time as notified to you by your distributor. Upon acceptance of the firm bid price
by you within that specified period of time, we will buy back your Basket DCDC ELIs at that firm bid price on that market
making day. Your distributor may also charge you a handling fee when you sell your Basket DCDC ELIs back to us on
a market making day. You should note that the amount you receive from selling your Basket DCDC ELIs back to us
on a market making day will be reduced by any distributor’s fees or charges and may be substantially less than
the original amount invested.
If you choose to sell your Basket DCDC ELIs back to us on a market making day, we will deliver the sale proceeds of
your Basket DCDC ELIs to your distributor on the 3rd business day after that market making day. Please check with your
distributor for further details.
Please also note that indicative bid prices and/or firm bid prices and/or market making activities may not be
available on a market making day if certain events or technical problems occur (in which case the affected market
making day will be postponed to the next Hong Kong business day on which the Hong Kong Stock Exchange is open
for trading which is not affected by any of these events or problems).
How can I find out the indicative bid price of my Basket DCDC ELIs?
We (as market agent) will make available (via the distributor(s)) indicative bid prices for all our Basket DCDC ELIs on
each market making day. We will not upload such information onto our website and you will need to contact your
distributor for further details on the most effective way to access the indicative bid prices.
— 12 —
C-39
Additional Information
A.
Basket DCDC ELI offering documents
The following Basket DCDC ELI offering documents contain detailed information about HSBC, the Programme
and the Basket DCDC ELIs. You should read all of these documents before deciding whether to invest in our Basket
DCDC ELIs:
(i)
the relevant indicative term sheet for the series of the Basket DCDC ELIs you would like to buy;
(ii)
the Programme Memorandum dated 22 July 2011 together with any addendum as stated in the relevant term sheet;
and
(iii) this Product Booklet together with any addendum as stated in the relevant term sheet.
The distributor(s) has an obligation to distribute to you ALL of the above documents in English or
Chinese as you may prefer.
B.
Ongoing disclosure by HSBC
C-38
HSBC will keep the SFC and the distributor(s) informed as soon as reasonably practicable if (i) HSBC (as issuer) ceases
to meet any core requirements in Appendix A to the Code; (ii) HSBC (as product arranger) ceases to meet any eligibility
requirements in 4.2 of the Code; and (iii) to the extent permitted by any applicable law, changes in our financial condition
or other circumstances which could reasonably be expected to have a material adverse effect on our ability (as issuer) to
fulfil our commitment in connection with our Basket DCDC ELIs. Your distributor will in turn inform you. Please contact
your distributor for further details.
If you would like to enquire about our Basket DCDC ELIs, visit any designated branches of the appointed distributor(s)
for the Basket DCDC ELIs.
— 13 —
Key Facts Statement (B)
C-6
Non-Principal Protected Unlisted Daily Cash Dividend Callable Equity Linked
Investments Linked to a Basket of Securities (Basket DCDC ELIs) with Daily Autocall
Condition and Daily Knock-in Feature
issued by
The Hongkong and Shanghai Banking Corporation Limited (HSBC)
We may issue six variations of Basket DCDC ELIs. This key facts statement only provides you with the key information
about one variation of Basket DCDC ELIs that we may issue: Basket DCDC ELIs with daily autocall condition and
daily knock-in.
This key facts statement does not contain all the information that may be important to you as an investor in our Basket
DCDC ELIs and your investment decision should not be made solely on the basis of the information contained in this
key facts statement. You should read the remaining sections of this product booklet (in particular, the section headed
“Risk Warnings”) and the other Basket DCDC ELI offering documents before deciding whether to invest in our Basket
DCDC ELIs.
If you are in any doubt about any of the contents of the Basket DCDC ELI offering documents, you should obtain
independent professional advice.
IMPORTANT RISK WARNINGS
●
Structured Investment Product
Our Basket DCDC ELIs are NOT equivalent to time deposits. They are structured investment products which are
embedded with derivatives.
●
Not Principal Protected
Our Basket DCDC ELIs are not principal protected: you could lose all of your investment.
●
Limited Maximum Potential Gain; you may not receive any potential cash dividend amount
The maximum potential gain under this product is capped at the maximum periodic potential cash dividend
amount(s) payable during the scheduled tenor (i.e. the period from (and including) the issue date to (and including)
the settlement date) of the Basket DCDC ELIs (less any cash settlement expenses). It is possible that you may not
receive any potential cash dividend amount for the entire scheduled tenor of the Basket DCDC ELIs.
●
Potential Payout determined by the Worst Performing Asset
The potential payout under our Basket DCDC ELIs is linked to the performance of the worst performing asset in
the basket (determined by us on each trading day based on the closing price of each reference asset in the basket
on such day). The worst performing asset on each trading day can be different. It will not matter how well the other
reference assets in the basket perform: the potential payout on our Basket DCDC ELIs is always determined by the
asset which performs worst out of all the reference assets in the basket.
●
No Collateral
Our Basket DCDC ELIs are not secured on any of our assets or any collateral.
●
Limited Market Making Arrangements
Our Basket DCDC ELIs are designed to be held to their expiry date. We (as market agent) will provide limited
market making arrangements on a bi-weekly basis for all our Basket DCDC ELIs. If you try to sell your Basket
DCDC ELIs before expiry, you may receive an amount which is substantially less than the original amount invested.
●
Not the same as Investing in the Reference Assets
Investing in our Basket DCDC ELIs is not the same as investing in the reference assets. Changes in the market price
of the reference assets may not lead to a corresponding change in the market value of, or your potential payout
under, the Basket DCDC ELIs.
— 14 —
C-34(c)
●
Re-investment Risk
Our Basket DCDC ELIs contain an autocall condition. If the autocall condition is satisfied, the Basket DCDC ELIs
will be terminated before expiry and no further potential cash dividend amount will be payable following
termination. You may not be able to enjoy the same rate of return if you re-invest in other investments with similar
risk parameters.
●
Not Covered by Investor Compensation Fund
Our Basket DCDC ELIs are not listed on any stock exchange and are not covered by the Investor Compensation
Fund.
●
Maximum Loss upon HSBC’s Default or Insolvency
Our Basket DCDC ELIs constitute general, unsecured and unsubordinated contractual obligations of HSBC as
issuer, and of no other person (including the ultimate holding company of our group, HSBC Holdings plc). When
you buy our Basket DCDC ELIs, you will be relying on HSBC’s creditworthiness. If HSBC becomes insolvent or
defaults on its obligations under the Basket DCDC ELIs, in the worst case scenario, you could lose all of your
investment.
●
English version of the terms and conditions prevails over Chinese version
For the purpose of lodgement with the relevant clearing system(s), the global certificate representing a series of
Basket DCDC ELIs and the terms and conditions of the Basket DCDC ELIs are issued in the English language only.
If there is any inconsistency between the Chinese version of the terms and conditions of our Basket DCDC ELIs and
the English version, the English version will prevail over the Chinese version. If you do not understand the English
version, you should obtain independent professional advice.
●
Exposure to risk from trade date
You should note that as all the commercial variables of our Basket DCDC ELIs are determined on the trade date,
you will be subject to the terms and conditions of our Basket DCDC ELIs from the trade date and you will be
exposed to the market risk and the price movement of the reference assets from the trade date which may affect the
market value of the Basket DCDC ELIs.
●
Conflicts of Interest
You should note that potential and actual conflicts of interest may arise from the different roles played by us and
our subsidiaries and affiliates in connection with our Basket DCDC ELIs.
●
You do not have direct contractual rights to enforce our Basket DCDC ELIs
You do not have direct contractual rights against us as the issuer to enforce our Basket DCDC ELIs. To assert your
rights as an investor in our Basket DCDC ELIs, you will have to rely on your distributor (directly or indirectly via
its custodian) to take action on your behalf. If your distributor fails to take action in accordance with your
instructions or if your distributor’s custodian fails to take action in accordance with the instructions of your
distributor, or your distributor or its custodian becomes insolvent or defaults on its obligations, you will need to take
action against your distributor in accordance with the terms of arrangement between you and your distributor.
C-34(d)
Commissions:
We may pay a commission to the distributor(s). Distributor(s)’ commissions and other transaction costs including our cost
of hedging are factored into the original issue price of the Basket DCDC ELIs.
What are Basket DCDC ELIs with Daily Autocall Condition and Daily Knock-in?
A.
Overview
●
Basket DCDC ELIs are structured investment products which contain an embedded conditional put option over the
reference assets in the basket. If you purchase a Basket DCDC ELI, you will be selling a conditional put option
over the reference assets in the basket to us. If certain conditions are met, you will be obliged to buy the worst
performing asset on the expiry date from us at its exercise price (as further described in the sub-section headed “E.
At Expiry” below).
— 15 —
C-2(b)
(c)(d)
(f)
●
Payout under the Basket DCDC ELIs is linked to the price performance of the worst performing asset in the basket.
The basket of reference assets may comprise a minimum of two and a maximum of six shares in companies and/or
units of funds listed on the Hong Kong Stock Exchange and quoted in Hong Kong dollars. Not all Hong Kong-listed
shares or funds can be used as a reference asset, you should check with your distributor what kind of reference assets
are available.
●
Our Basket DCDC ELIs will be denominated and settled in Hong Kong dollars, United States dollars or other
non-restricted and freely convertible currencies as specified in the relevant term sheet. If the settlement currency of
the Basket DCDC ELIs is different from Hong Kong dollars (being the currency in which the reference assets trade),
we will convert one currency into another at the exchange rate as specified in the relevant term sheet in making
calculations under the Basket DCDC ELIs (if applicable).
●
You can buy a Basket DCDC ELI at its issue price, which is equal to the nominal amount of the Basket DCDC ELI.
The nominal amount of a Basket DCDC ELI is equivalent to the face amount of the Basket DCDC ELI and will be
specified in the relevant term sheet. The minimum investment amount is HKD100,000 (or its equivalent in foreign
currency).
●
The key features of our Basket DCDC ELIs with daily autocall condition and daily knock-in are set out below:
Basket DCDC ELIs with:
A. Potential Cash Dividend Amount
Daily Autocall Condition and Daily Knock-in
May receive potential periodic cash dividend amount
if certain conditions are met
Daily autocall condition applies
Daily knock-in event applies
B. Autocall Condition
C. Knock-in Event
●
You should note that while you place your Basket DCDC ELI purchase order(s) during the offer period, all of the
commercial variables in relation to the reference assets (including the initial spot prices, the exercise prices, the call
prices, the floor prices and the knock-in prices of the reference assets) that are used to determine the payout of your
Basket DCDC ELI will only be recorded and determined on the trade date after you have purchased the Basket
DCDC ELI. The initial spot price of a reference asset is either (i) the closing price of that reference asset on the trade
date or (ii) the prevailing market price of that reference asset as quoted by the Hong Kong Stock Exchange at the
time your Basket DCDC ELI purchase order is executed on the trade date. A contract note prepared by your
distributor containing all the finalised commercial terms that apply to your Basket DCDC ELI will be sent to you
by your distributor within 2 Hong Kong business days after the trade date.
B.
How to determine the worst performing asset?
●
The price performance of the worst performing asset in the basket will determine (i) whether the daily autocall
condition has been met; and (ii) the total payout under our Basket DCDC ELIs.
The reference asset in the basket with the lowest “performance” on a particular trading day will be the worst
performing asset for that trading day. The worst performing asset on each trading day can be different. We will use
the following formula to determine the “performance” for each reference asset on a trading day:
Performance =
Closing price of the reference asset on a trading day
Initial spot price of the reference asset
x 100%
If there is more than one reference asset with the same lowest “performance” on a particular trading day, we will,
in our sole and absolute discretion acting in good faith and in a commercially reasonable manner, decide which one
is the worst performing asset for that trading day.
C.
Payment of Potential Cash Dividend Amount(s)
●
The relevant term sheet will specify whether the potential cash dividend amount for a calculation period is:
(i)
a variable amount calculated according to the variable accrual formula (see “Variable Potential Cash Dividend
Amount” below); or
— 16 —
C-2(i)
(ii)
a fixed amount (see “Fixed Potential Cash Dividend Amount” below).
●
You should note that it is possible that you may not receive any potential cash dividend amount for the entire
scheduled tenor of the Basket DCDC ELIs.
●
Variable Potential Cash Dividend Amount
If the potential cash dividend amount for a calculation period is specified in the term sheet to be a variable amount,
we will determine whether such variable potential cash dividend amount is payable by reference to the price
performance of the worst performing asset in the basket on each trading day. The variable potential cash dividend
amount will be calculated according to the following variable accrual formula:
x
Days in
Total days
(II) Nominal amount x Day-out cash dividend rate x
Days out
Total days
(I) Nominal amount x
Day-in cash dividend rate
PLUS
‘Days in’ means the total number of trading days in a calculation period on which the closing price of the worst
performing asset (determined by us on each trading day based on the closing price of each reference asset in the
basket on such day) is at or above its floor price.
‘Days out’ means the total number of trading days in a calculation period on which the closing price of the worst
performing asset (determined by us on each trading day based on the closing price of each reference asset in the
basket on such day) is below its floor price.
‘Total days’ mean the total number of trading days in a calculation period.
The floor price of each reference asset is set at a specified percentage of its initial spot price and will be set out in
the relevant term sheet. The specified percentage used to calculate the floor price of each reference asset for each
relevant trading day during all of the calculation periods will be the same.
The day-in cash dividend rate and the day-out cash dividend rate will be specified in the relevant term sheet. The
day-out cash dividend rate can be set at zero.
●
Fixed Potential Cash Dividend Amount
If the potential cash dividend amount for a calculation period is specified in the term sheet to be a fixed amount,
such fixed potential cash dividend amount is payable regardless of the price performance of the reference assets in
the basket. The fixed potential cash dividend amount will be calculated according to the following formula:
Nominal amount x Fixed cash dividend rate
D.
Daily Autocall Condition
●
The daily autocall condition is satisfied if the closing price of the worst performing asset is at or above its call price
on a call date, which is set as each trading day (excluding the expiry date) during a relevant period as set out in the
relevant term sheet.
●
The call price of each reference asset is set at a specified percentage of its initial spot price and will be set out in
the relevant term sheet. The specified percentage used to calculate the call price of each reference asset on each call
date will be the same. The call price may be set at a level which is higher than, equal to or lower than the exercise
price.
●
If the daily autocall condition is satisfied on a call date, we will terminate the Basket DCDC ELIs on that call date
(regardless of whether a daily knock-in event has occurred). You will receive on the early settlement date (being the
3rd business day after that call date) the nominal amount of the Basket DCDC ELIs and any accrued potential cash
dividend amount calculated up to (and including) that call date (less any cash settlement expenses).
— 17 —
E.
At Expiry
●
If the daily autocall condition is not satisfied on any of the relevant call dates and the Basket DCDC ELIs have not
otherwise been early terminated, we will determine the final settlement payout under the Basket DCDC ELIs on the
expiry date. For this variation of Basket DCDC ELIs, the final settlement payout will depend on:
C-2(i)
(i)
the amount of any accrued potential cash dividend amount payable for the final calculation period (see also
“C. Payment of Potential Cash Dividend Amount(s)” above);
(ii)
whether a daily knock-in event has occurred. A daily knock-in event occurs if the closing price of the worst
performing asset is at or below its knock-in price on any knock-in event date, which is set as each trading
day during a relevant period as set out in the relevant term sheet. The knock-in price of each reference asset
is set at a specified percentage of its initial spot price and will be set out in the relevant term sheet. The
specified percentage used to calculate the knock-in price of each reference asset for each knock-in event date
will be the same. The knock-in price will always be set at a level which is lower than the exercise price and
the call price. The reference asset which triggers a knock-in event on a knock-in event date may or may not
be the same reference asset which is the worst performing asset on the expiry date; and
(iii) the closing price of the worst performing asset on the expiry date compared to its exercise price AND its call
price.
●
The exercise price of each reference asset may be expressed as a specified percentage of its initial spot price or in
a range of percentages of its initial spot price (such range will be no wider than Ⳳ2.5%) in the relevant term sheet.
The specified percentage (or if applicable, range of percentages) used to calculate the exercise price of each
reference asset will be the same.
●
If (i) a daily knock-in event has not occurred; or (ii) a daily knock-in event has occurred but the closing price of
the worst performing asset on the expiry date is at or above EITHER its exercise price OR its call price, we will
pay you on the settlement date (being the 3rd business day after the expiry date) a cash amount equal to the nominal
amount of the Basket DCDC ELIs and any accrued potential cash dividend amount for the final calculation period
(less any cash settlement expenses).
●
If a daily knock-in event has occurred and the closing price of the worst performing asset on the expiry date is
below BOTH its exercise price AND its call price, the conditional put option will be exercised by us at expiry of
the Basket DCDC ELIs and you will receive on the settlement date (being the 3rd business day after the expiry date)
either:
(i)
if you have elected for physical settlement — physical delivery of a number of the worst performing asset on
the expiry date (being the physical settlement amount) after payment of all physical settlement expenses
(please refer to page 115 for details of how the physical settlement amount is calculated) and a cash payment
for any fractional shares or units of the worst performing asset on the expiry date (please refer to page 116 for
details of how this amount is calculated); or
(ii)
if you have elected for cash settlement — payment of an amount equal to the cash equivalent of the physical
settlement amount (less any cash settlement expenses) (please refer to page 116 for details of how the cash
equivalent of the physical settlement amount is calculated).
You will also receive on the settlement date any accrued potential cash dividend amount for the final calculation
period.
You should note that where the conditional put option is exercised by us, you will be obliged to buy the worst
performing asset on the expiry date from us at its exercise price. In this case, you will suffer a loss if the
market value of the physical settlement amount (together with any fractional shares or units of the worst
performing asset on the expiry date) (in both cases calculated based on the closing price of the worst
performing asset on the expiry date) or the cash equivalent of the physical settlement amount, together with
any potential cash dividend amount(s) paid during the scheduled tenor of the Basket DCDC ELIs, is less than
the original amount invested. In an extreme case, you will not receive any potential cash dividend amount for
the entire scheduled tenor and the physical settlement amount or its cash equivalent could be worth nothing
and you could lose all of your investment.
— 18 —
You should also note that, if you elect for physical settlement, the physical settlement amount will only be
delivered to you on the settlement date. Therefore, you will be exposed to any movement in the market price
of the worst performing asset on the expiry date during the period between the expiry date and the settlement
date. If you choose not to sell such worst performing asset on the settlement date, you will be exposed to the
market risk of holding such worst performing asset.
●
You should note that your payout under the Basket DCDC ELIs will be reduced by any distributor’s charges and any
cash settlement expenses or physical settlement expenses payable by you at expiry of the Basket DCDC ELIs.
Worst Case Scenario
The hypothetical example below does not reflect a complete analysis of all possible gain or loss scenarios. You must
not rely on it as an indication of the price performance of the reference assets in the basket or the payout on the Basket
DCDC ELIs.
The example below illustrates the worst case scenario where the worst performing asset in the basket of two reference
assets performs poorly during the investment period of the Basket DCDC ELIs.
Performance of reference assets (%)
C-19
A daily knock-in event occurred
125
Call Price (% of initial spot price)
100
Exercise Price; Floor Price (% of initial spot price)
75
Knock-in Price (% of initial spot price)
50
25
Investment period
0
Trade Date
1st Calculation Period
End Date/1st Call Date
2nd Calculation Period
End Date
3rd Calculation Period
End Date
4th Calculation Period
End Date/Expiry Date
Call Dates
(each trading day from (and including) the 1st calculation period end date to (and
excluding) the expiry date)
Knock-in Event Dates (each trading day from (but excluding)
the trade date to (and including) the expiry date)
Performance of reference asset 1 (% of initial spot price)
Performance of reference asset 2 (% of initial spot price)
According to the above diagram, reference asset 2 is the worst performing asset in the basket throughout the investment
period (i.e. the period from and including the trade date to and including the expiry date) of the Basket DCDC ELIs.
The above example illustrates the following:
(i)
Potential Cash Dividend Payout
The potential cash dividend amount is (a) fixed for the 1st calculation period and (b) variable for each of the 2nd to the
4th calculation periods. You will receive the fixed potential cash dividend amount for the 1st calculation period regardless
of the price performance of the reference assets in the basket. Since the worst performing asset (i.e. reference asset 2)
closes below its floor price on each of the trading days from the 2nd to the 4th calculation periods, you will receive the
variable potential cash dividend amount (calculated by reference to the day-out cash dividend rate) for each of the 2nd
to the 4th calculation periods.
— 19 —
(ii)
Daily Autocall Condition Not Satisfied
The call dates are set as each trading day during the period from (and including) the 1st calculation period end date to
(and excluding) the expiry date. Since the worst performing asset (i.e. reference asset 2) closes below its call price on each
call date, the daily autocall condition is not satisfied and the Basket DCDC ELIs will not be early terminated.
(iii) Daily Knock-in Event Occurred
The knock-in event dates are set as each trading day during the period from (but excluding) the trade date to (and
including) the expiry date. Since the worst performing asset (i.e. reference asset 2) closes at or below its knock-in price
on certain knock-in event dates, hence a daily knock-in event has occurred. Since the worst performing asset also closes
below its exercise price and its call price on the expiry date, you will receive on the settlement date either physical
delivery of the physical settlement amount (together with a cash payment for any fractional shares or units of the worst
performing asset) or payment of the cash equivalent of the physical settlement amount. In this case, you will suffer a loss
if the market value of the physical settlement amount (together with any fractional shares or units of the worst performing
asset) (in both cases calculated based on the closing price of the worst performing asset on the expiry date) or the cash
equivalent of the physical settlement amount, together with any potential cash dividend amount(s) paid during the
scheduled tenor of the Basket DCDC ELIs is less than the original amount invested.
You should note that the above example assumes that the potential cash dividend amount is fixed for the 1st
calculation period, in which case you will receive such fixed potential cash dividend amount regardless of the price
performance of the reference assets in the basket. However, if the potential cash dividend amount is variable for
all of the calculation periods during the investment period of the Basket DCDC ELIs, it is possible that you may
not receive any potential cash dividend amount for the entire scheduled tenor. In an extreme case, you will not
receive any potential cash dividend amount for the entire scheduled tenor and the physical settlement amount or
its cash equivalent could be worth nothing and you could lose all of your investment.
Mode of Settlement at Expiry
When you place your purchase order for the Basket DCDC ELIs, you will need to specify whether you elect for cash
settlement or physical settlement upon expiry of your Basket DCDC ELIs in the case where a daily knock-in event has
occurred and the closing price of the worst performing asset on the expiry date is below its exercise price and its call price.
You can change your election at any time no later than 4:00 p.m. on the 3rd Hong Kong business day before the expiry
date. Please ask your distributor for details.
Adjustment to the terms and conditions and early termination of our Basket DCDC ELIs
Upon the occurrence of certain adjustment events (such as a potential adjustment event, a merger event or a tender offer)
affecting a reference asset in the basket, we can adjust some of the terms of our Basket DCDC ELIs (including adjusting
the exercise price, the call price, the floor price and the knock-in price of the affected reference asset) to account for that
event so as to preserve the economic equivalence of the Basket DCDC ELIs. If we determine that any adjustment to the
terms of the Basket DCDC ELIs is not appropriate to account for the relevant merger event or tender offer and to preserve
the economic equivalence of the Basket DCDC ELIs, we will seek to substitute the affected reference asset with another
reference asset in accordance with the terms and conditions of our Basket DCDC ELIs and make any further adjustments
to the terms of the Basket DCDC ELIs as we think fit (acting in good faith and in a commercially reasonable manner)
to account for the relevant merger event or tender offer. If we determine that substitution is not appropriate, we will early
terminate our Basket DCDC ELIs in accordance with the terms and conditions of our Basket DCDC ELIs.
— 20 —
Upon the occurrence of certain termination events (such as an insolvency or a delisting) affecting a reference asset in the
basket, we will seek to substitute the affected reference asset with another reference asset in accordance with the terms
and conditions of our Basket DCDC ELIs and make any further adjustments to the terms of the Basket DCDC ELIs as
we think fit (acting in good faith and in a commercially reasonable manner) to account for the relevant termination event.
If we determine that substitution is not appropriate, we will early terminate our Basket DCDC ELIs in accordance with
the terms and conditions of our Basket DCDC ELIs.
Upon the occurrence of certain market disruption events, we can postpone some of the key dates relevant to the terms of
our Basket DCDC ELIs. Any adjustments or substitution or early termination will be determined by us in our sole and
absolute discretion acting in good faith and in a commercially reasonable manner. Please refer to the summary table on
pages 93 to 99 of this product booklet for further details.
What charges do I have to pay?
Cash Settlement Expenses — If a settlement amount in cash is payable, you will have to pay for any expenses incurred
by us in connection with making the payment of the settlement amount in cash to you, including, for example, any taxes
and duties arising from the expiry of the Basket DCDC ELIs. Currently there are no such expenses. If such expenses are
payable in the future, we will notify the distributor(s) who will in turn inform you in advance.
Physical Settlement Expenses — Before the physical settlement amount is delivered to you on the settlement date, you
will have to pay for all out-of-pocket expenses relating to the transfer and receipt of the physical settlement amount,
including buyer’s stamp duty, transaction levies, registration charges and any other charges levied by your distributor (see
also “Distributor’s charges” below).
Distributor’s charges — Your distributor may charge you fees (including any charges for opening and maintaining a
securities account or an investment account with the distributor and any handling fee in relation to the Basket DCDC
ELIs). Please contact your distributor for details.
Cash settlement expenses, physical settlement expenses and distributor’s charges will affect the potential gain or
loss you get on your investment.
How can I buy the Basket DCDC ELIs?
If you would like to buy our Basket DCDC ELIs, you will have to place your Basket DCDC ELI purchase order with your
distributor. You can contact the appointed distributor(s) to enquire about the Basket DCDC ELIs on offer and the
application procedures. Your distributor will inform you of the purchase consideration (being the issue price) and any
applicable charges.
Once you place your Basket DCDC ELI purchase order with your distributor on the order date, you are committed to
purchase the Basket DCDC ELIs unless the post-sale cooling-off period is applicable (see section below on “Is there a
post-sale cooling-off period for our Basket DCDC ELIs?”) or you have cancelled your order within the specified period
of time as notified by your distributor following the publication of an updated programme memorandum and/or an
addendum to the programme memorandum and/or this product booklet during the offer period after you have placed your
order.
Your purchase order will be executed by us on the trade date and your distributor will pay the purchase consideration
(being the issue price) to us on your behalf on the issue date (being 6 to 10 business days after the trade date). Please
contact your distributor for details on how and when you have to pay the issue price to your distributor. A contract note
prepared by your distributor containing all the finalised commercial terms will be sent to you by your distributor within
2 Hong Kong business days after the trade date.
— 21 —
Is there a post-sale cooling-off period for our Basket DCDC ELIs?
C-2(o)
Basket DCDC ELIs with an investment period of more than one year
If you have purchased a Basket DCDC ELI with an investment period (i.e. the period from (and including) the trade date
to (and including) the expiry date) of more than one year, you can choose to cancel or unwind the whole (and not part
of) your Basket DCDC ELI purchase order during the period from (and including) the date you place your purchase order
to (and including) the 5th Hong Kong business day after that date (this period is referred to as the “post-sale cooling-off
period”) by submitting your instructions to your distributor between 10:00 a.m. and 12:00 noon on any Hong Kong
business day during the post-sale cooling-off period.
If you submit your instructions to cancel your Basket DCDC ELI purchase order to your distributor before your Basket
DCDC ELI purchase order has been executed on the trade date, your distributor will not pay the issue price to us on your
behalf on the issue date. If you submit your instructions to unwind your Basket DCDC ELI purchase order to your
distributor after your Basket DCDC ELI purchase order has been executed on the trade date, your distributor will pay the
issue price to us on your behalf on the issue date and we will pay your distributor a cash amount equal to the issue price
less any market value adjustments on the later of: (i) the 3rd business day after the day you submit your instructions to
unwind your Basket DCDC ELI purchase order; or (ii) the issue date.
In both cases, your distributor may charge you a handling fee when you cancel or unwind your Basket DCDC ELI
purchase order and (if applicable) such handling fee will be deducted from the cash amount returned to you. Please check
with your distributor for further details of when you will receive such cash amount from your distributor. The cash
amount returned to you may be substantially less than the original amount invested. In either case, the distributor’s
commission (if any) will not be deducted from the issue price or cash amount returned to you.
Basket DCDC ELIs with an investment period of one year or less
Please note that your right to cancel or unwind your Basket DCDC ELI purchase order during the post-sale cooling-off
period DOES NOT apply to Basket DCDC ELIs with an investment period of one year or less.
Is there any market making arrangement for your Basket DCDC ELIs before expiry?
Our Basket DCDC ELIs are not listed on any stock exchange. We (as market agent) will provide limited market making
arrangements for all our Basket DCDC ELIs (regardless of the length of the investment period and the scheduled tenor)
on each market making day falling every other Tuesday after the issue date up to the 3rd Hong Kong business day before
the expiry date. On each market making day, we (as market agent) will provide (via the distributor(s)): (i) indicative bid
prices (on a per-Basket DCDC ELI basis) during normal business hours; and (ii) a firm bid price (on a per-Basket DCDC
ELI basis) upon your request, provided that such request is submitted to your distributor between the opening of the
morning session of the Hong Kong Stock Exchange and the close of the morning session of the Hong Kong Stock
Exchange on such market making day. You may choose to sell part of or the entire holding of your Basket DCDC ELIs
provided that the minimum sell back order is equal to one Basket DCDC ELI and the total amount of Basket DCDC ELIs
you wish to sell is an integral number.
The indicative bid prices will be determined by us taking into account certain factors as set out on page 125 of this product
booklet. The indicative bid prices are provided for your reference only as they will be subject to intra-day change and may
not be the same as the firm bid price at which we are willing to buy back your Basket DCDC ELIs. Upon your request
for a firm bid price, we (as market agent) will determine such firm bid price based on the indicative bid price and the
prevailing market conditions at the time of your request. We will notify your distributor of such firm bid price and your
distributor will in turn inform you. You should note that the firm bid price provided to you by your distributor will
only be valid for a limited period of time as notified to you by your distributor. Upon acceptance of the firm bid price
by you within that specified period of time, we will buy back your Basket DCDC ELIs at that firm bid price on that market
making day. Your distributor may also charge you a handling fee when you sell your Basket DCDC ELIs back to us on
a market making day. You should note that the amount you receive from selling your Basket DCDC ELIs back to us
on a market making day will be reduced by any distributor’s fees or charges and may be substantially less than
the original amount invested.
— 22 —
C-39
If you choose to sell your Basket DCDC ELIs back to us on a market making day, we will deliver the sale proceeds of
your Basket DCDC ELIs to your distributor on the 3rd business day after that market making day. Please check with your
distributor for further details.
Please also note that indicative bid prices and/or firm bid prices and/or market making activities may not be
available on a market making day if certain events or technical problems occur (in which case the affected market
making day will be postponed to the next Hong Kong business day on which the Hong Kong Stock Exchange is open
for trading which is not affected by any of these events or problems).
How can I find out the indicative bid price of my Basket DCDC ELIs?
C-39
We (as market agent) will make available (via the distributor(s)) indicative bid prices for all our Basket DCDC ELIs on
each market making day. We will not upload such information onto our website and you will need to contact your
distributor for further details on the most effective way to access the indicative bid prices.
Additional Information
A.
Basket DCDC ELI offering documents
The following Basket DCDC ELI offering documents contain detailed information about HSBC, the Programme
and the Basket DCDC ELIs. You should read all of these documents before deciding whether to invest in our Basket
DCDC ELIs:
(i)
the relevant indicative term sheet for the series of the Basket DCDC ELIs you would like to buy;
(ii)
the Programme Memorandum dated 22 July 2011 together with any addendum as stated in the relevant term sheet;
and
(iii) this Product Booklet together with any addendum as stated in the relevant term sheet.
The distributor(s) has an obligation to distribute to you ALL of the above documents in English or
Chinese as you may prefer.
B.
Ongoing disclosure by HSBC
C-38
HSBC will keep the SFC and the distributor(s) informed as soon as reasonably practicable if (i) HSBC (as issuer) ceases
to meet any core requirements in Appendix A to the Code; (ii) HSBC (as product arranger) ceases to meet any eligibility
requirements in 4.2 of the Code; and (iii) to the extent permitted by any applicable law, changes in our financial condition
or other circumstances which could reasonably be expected to have a material adverse effect on our ability (as issuer) to
fulfil our commitment in connection with our Basket DCDC ELIs. Your distributor will in turn inform you. Please contact
your distributor for further details.
If you would like to enquire about our Basket DCDC ELIs, visit any designated branches of the appointed distributor(s)
for the Basket DCDC ELIs.
— 23 —
Key Facts Statement (C)
C-6
Non-Principal Protected Unlisted Daily Cash Dividend Callable Equity Linked
Investments Linked to a Basket of Securities (Basket DCDC ELIs) with Daily
Autocall Condition and At-Expiry Knock-in Feature
issued by
The Hongkong and Shanghai Banking Corporation Limited (HSBC)
We may issue six variations of Basket DCDC ELIs. This key facts statement only provides you with the key
information about one variation of Basket DCDC ELIs that we may issue: Basket DCDC ELIs with daily autocall
condition and at-expiry knock-in.
This key facts statement does not contain all the information that may be important to you as an investor in our
Basket DCDC ELIs and your investment decision should not be made solely on the basis of the information
contained in this key facts statement. You should read the remaining sections of this product booklet (in particular,
the section headed “Risk Warnings”) and the other Basket DCDC ELI offering documents before deciding whether
to invest in our Basket DCDC ELIs.
If you are in any doubt about any of the contents of the Basket DCDC ELI offering documents, you should obtain
independent professional advice.
IMPORTANT RISK WARNINGS
●
Structured Investment Product
Our Basket DCDC ELIs are NOT equivalent to time deposits. They are structured investment products which are
embedded with derivatives.
●
Not Principal Protected
Our Basket DCDC ELIs are not principal protected: you could lose all of your investment.
●
Limited Maximum Potential Gain; you may not receive any potential cash dividend amount
The maximum potential gain under this product is capped at the maximum periodic potential cash dividend
amount(s) payable during the scheduled tenor (i.e. the period from (and including) the issue date to (and
including) the settlement date) of the Basket DCDC ELIs (less any cash settlement expenses). It is possible that
you may not receive any potential cash dividend amount for the entire scheduled tenor of the Basket DCDC ELIs.
●
Potential Payout determined by the Worst Performing Asset
The potential payout under our Basket DCDC ELIs is linked to the performance of the worst performing asset
in the basket (determined by us on each trading day based on the closing price of each reference asset in the
basket on such day). The worst performing asset on each trading day can be different. It will not matter how well
the other reference assets in the basket perform: the potential payout on our Basket DCDC ELIs is always
determined by the asset which performs worst out of all the reference assets in the basket.
●
No Collateral
Our Basket DCDC ELIs are not secured on any of our assets or any collateral.
●
Limited Market Making Arrangements
Our Basket DCDC ELIs are designed to be held to their expiry date. We (as market agent) will provide limited
market making arrangements on a bi-weekly basis for all our Basket DCDC ELIs. If you try to sell your Basket
DCDC ELIs before expiry, you may receive an amount which is substantially less than the original amount
invested.
●
Not the same as Investing in the Reference Assets
Investing in our Basket DCDC ELIs is not the same as investing in the reference assets. Changes in the market
price of the reference assets may not lead to a corresponding change in the market value of, or your potential
payout under, the Basket DCDC ELIs.
— 24 —
C-34(c)
●
Re-investment Risk
Our Basket DCDC ELIs contain an autocall condition. If the autocall condition is satisfied, the Basket DCDC ELIs
will be terminated before expiry and no further potential cash dividend amount will be payable following
termination. You may not be able to enjoy the same rate of return if you re-invest in other investments with similar
risk parameters.
●
Not Covered by Investor Compensation Fund
Our Basket DCDC ELIs are not listed on any stock exchange and are not covered by the Investor Compensation
Fund.
●
Maximum Loss upon HSBC’s Default or Insolvency
Our Basket DCDC ELIs constitute general, unsecured and unsubordinated contractual obligations of HSBC as
issuer, and of no other person (including the ultimate holding company of our group, HSBC Holdings plc). When
you buy our Basket DCDC ELIs, you will be relying on HSBC’s creditworthiness. If HSBC becomes insolvent or
defaults on its obligations under the Basket DCDC ELIs, in the worst case scenario, you could lose all of your
investment.
●
English version of the terms and conditions prevails over Chinese version
For the purpose of lodgement with the relevant clearing system(s), the global certificate representing a series of
Basket DCDC ELIs and the terms and conditions of the Basket DCDC ELIs are issued in the English language only.
If there is any inconsistency between the Chinese version of the terms and conditions of our Basket DCDC ELIs and
the English version, the English version will prevail over the Chinese version. If you do not understand the English
version, you should obtain independent professional advice.
●
Exposure to risk from trade date
You should note that as all the commercial variables of our Basket DCDC ELIs are determined on the trade date,
you will be subject to the terms and conditions of our Basket DCDC ELIs from the trade date and you will be
exposed to the market risk and the price movement of the reference assets from the trade date which may affect the
market value of the Basket DCDC ELIs.
●
Conflicts of Interest
You should note that potential and actual conflicts of interest may arise from the different roles played by us and
our subsidiaries and affiliates in connection with our Basket DCDC ELIs.
●
You do not have direct contractual rights to enforce our Basket DCDC ELIs
You do not have direct contractual rights against us as the issuer to enforce our Basket DCDC ELIs. To assert your
rights as an investor in our Basket DCDC ELIs, you will have to rely on your distributor (directly or indirectly via
its custodian) to take action on your behalf. If your distributor fails to take action in accordance with your
instructions or if your distributor’s custodian fails to take action in accordance with the instructions of your
distributor, or your distributor or its custodian becomes insolvent or defaults on its obligations, you will need to take
action against your distributor in accordance with the terms of arrangement between you and your distributor.
C-34(d)
Commissions:
We may pay a commission to the distributor(s). Distributor(s)’ commissions and other transaction costs including our cost
of hedging are factored into the original issue price of the Basket DCDC ELIs.
What are Basket DCDC ELIs with Daily Autocall Condition and At-Expiry Knock-in?
A.
Overview
●
Basket DCDC ELIs are structured investment products which contain an embedded conditional put option over the
reference assets in the basket. If you purchase a Basket DCDC ELI, you will be selling a conditional put option
over the reference assets in the basket to us. If certain conditions are met, you will be obliged to buy the worst
performing asset on the expiry date from us at its exercise price (as further described in the sub-section headed “E.
At Expiry” below).
— 25 —
C-2(b)
(c)(d)
(f)
●
Payout under the Basket DCDC ELIs is linked to the price performance of the worst performing asset in the basket.
The basket of reference assets may comprise a minimum of two and a maximum of six shares in companies and/or
units of funds listed on the Hong Kong Stock Exchange and quoted in Hong Kong dollars. Not all Hong Kong-listed
shares or funds can be used as a reference asset, you should check with your distributor what kind of reference assets
are available.
●
Our Basket DCDC ELIs will be denominated and settled in Hong Kong dollars, United States dollars or other
non-restricted and freely convertible currencies as specified in the relevant term sheet. If the settlement currency of
the Basket DCDC ELIs is different from Hong Kong dollars (being the currency in which the reference assets trade),
we will convert one currency into another at the exchange rate as specified in the relevant term sheet in making
calculations under the Basket DCDC ELIs (if applicable).
●
You can buy a Basket DCDC ELI at its issue price, which is equal to the nominal amount of the Basket DCDC ELI.
The nominal amount of a Basket DCDC ELI is equivalent to the face amount of the Basket DCDC ELI and will be
specified in the relevant term sheet. The minimum investment amount is HKD100,000 (or its equivalent in foreign
currency).
●
The key features of our Basket DCDC ELIs with daily autocall condition and at-expiry knock-in are set out below:
Basket DCDC ELIs with:
A. Potential Cash Dividend Amount
Daily Autocall Condition and At-Expiry Knock-in
May receive potential periodic cash dividend amount
if certain conditions are met
Daily autocall condition applies
At-expiry knock-in event applies
B. Autocall Condition
C. Knock-in Event
●
You should note that while you place your Basket DCDC ELI purchase order(s) during the offer period, all of the
commercial variables in relation to the reference assets (including the initial spot prices, the exercise prices, the call
prices, the floor prices and the knock-in prices of the reference assets) that are used to determine the payout of your
Basket DCDC ELI will only be recorded and determined on the trade date after you have purchased the Basket
DCDC ELI. The initial spot price of a reference asset is either (i) the closing price of that reference asset on the trade
date or (ii) the prevailing market price of that reference asset as quoted by the Hong Kong Stock Exchange at the
time your Basket DCDC ELI purchase order is executed on the trade date. A contract note prepared by your
distributor containing all the finalised commercial terms that apply to your Basket DCDC ELI will be sent to you
by your distributor within 2 Hong Kong business days after the trade date.
B.
How to determine the worst performing asset?
●
The price performance of the worst performing asset in the basket will determine (i) whether the daily autocall
condition has been met; and (ii) the total payout under our Basket DCDC ELIs.
The reference asset in the basket with the lowest “performance” on a particular trading day will be the worst
performing asset for that trading day. The worst performing asset on each trading day can be different. We will use
the following formula to determine the “performance” for each reference asset on a trading day:
Performance =
Closing price of the reference asset on a trading day
Initial spot price of the reference asset
x 100%
If there is more than one reference asset with the same lowest “performance” on a particular trading day, we will,
in our sole and absolute discretion acting in good faith and in a commercially reasonable manner, decide which one
is the worst performing asset for that trading day.
C.
Payment of Potential Cash Dividend Amount(s)
●
The relevant term sheet will specify whether the potential cash dividend amount for a calculation period is:
(i)
a variable amount calculated according to the variable accrual formula (see “Variable Potential Cash Dividend
Amount” below); or
(ii)
a fixed amount (see “Fixed Potential Cash Dividend Amount” below).
— 26 —
C-2(i)
●
You should note that it is possible that you may not receive any potential cash dividend amount for the entire
scheduled tenor of the Basket DCDC ELIs.
●
Variable Potential Cash Dividend Amount
If the potential cash dividend amount for a calculation period is specified in the term sheet to be a variable amount,
we will determine whether such variable potential cash dividend amount is payable by reference to the price
performance of the worst performing asset in the basket on each trading day. The variable potential cash dividend
amount will be calculated according to the following variable accrual formula:
(I) Nominal amount
x
Days in
Total days
x Day-out cash dividend rate x
Days out
Total days
x
Day-in cash dividend rate
PLUS
(II) Nominal amount
‘Days in’ means the total number of trading days in a calculation period on which the closing price of the worst
performing asset (determined by us on each trading day based on the closing price of each reference asset in the
basket on such day) is at or above its floor price.
‘Days out’ means the total number of trading days in a calculation period on which the closing price of the worst
performing asset (determined by us on each trading day based on the closing price of each reference asset in the
basket on such day) is below its floor price.
‘Total days’ mean the total number of trading days in a calculation period.
The floor price of each reference asset is set at a specified percentage of its initial spot price and will be set out in
the relevant term sheet. The specified percentage used to calculate the floor price of each reference asset for each
relevant trading day during all of the calculation periods will be the same.
The day-in cash dividend rate and the day-out cash dividend rate will be specified in the relevant term sheet. The
day-out cash dividend rate can be set at zero.
●
Fixed Potential Cash Dividend Amount
If the potential cash dividend amount for a calculation period is specified in the term sheet to be a fixed amount,
such fixed potential cash dividend amount is payable regardless of the price performance of the reference assets in
the basket. The fixed potential cash dividend amount will be calculated according to the following formula:
Nominal amount x Fixed cash dividend rate
D.
Daily Autocall Condition
●
The daily autocall condition is satisfied if the closing price of the worst performing asset is at or above its call price
on a call date, which is set as each trading day (excluding the expiry date) during a relevant period as set out in the
relevant term sheet.
●
The call price of each reference asset is set at a specified percentage of its initial spot price and will be set out in
the relevant term sheet. The specified percentage used to calculate the call price of each reference asset on each call
date will be the same. The call price may be set at a level which is higher than, equal to or lower than the exercise
price.
●
If the daily autocall condition is satisfied on a call date, we will terminate the Basket DCDC ELIs on that call date.
You will receive on the early settlement date (being the 3rd business day after that call date) the nominal amount
of the Basket DCDC ELIs and any accrued potential cash dividend amount calculated up to (and including) that call
date (less any cash settlement expenses).
— 27 —
E.
At Expiry
●
If the daily autocall condition is not satisfied on any of the relevant call dates and the Basket DCDC ELIs have not
otherwise been early terminated, we will determine the final settlement payout under the Basket DCDC ELIs on the
expiry date. For this variation of Basket DCDC ELIs, the final settlement payout will depend on:
C-2(i)
(i)
the amount of any accrued potential cash dividend amount payable for the final calculation period (see also
“C. Payment of Potential Cash Dividend Amount(s)” above); and
(ii)
whether an at-expiry knock-in event has occurred. An at-expiry knock-in event occurs if the closing price of
the worst performing asset is at or below its knock-in price on the knock-in event date, which is set as the
expiry date. The knock-in price of each reference asset is set at a specified percentage of its initial spot price
and will be set out in the relevant term sheet. The specified percentage used to calculate the knock-in price
of each reference asset on the knock-in event date will be the same. The knock-in price will always be set at
a level which is lower than the exercise price and the call price.
●
The exercise price of each reference asset may be expressed as a specified percentage of its initial spot price or in
a range of percentages of its initial spot price (such range will be no wider than Ⳳ2.5%) in the relevant term sheet.
The specified percentage (or if applicable, range of percentages) used to calculate the exercise price of each
reference asset will be the same.
●
If an at-expiry knock-in event has not occurred, we will pay you on the settlement date (being the 3rd business day
after the expiry date) a cash amount equal to the nominal amount of the Basket DCDC ELIs and any accrued
potential cash dividend amount for the final calculation period (less any cash settlement expenses).
●
If an at-expiry knock-in event has occurred, the conditional put option will be exercised by us at expiry of the
Basket DCDC ELIs and you will receive on the settlement date (being the 3rd business day after the expiry date)
either:
(i)
if you have elected for physical settlement — physical delivery of a number of the worst performing asset on
the expiry date (being the physical settlement amount) after payment of all physical settlement expenses
(please refer to page 115 for details of how the physical settlement amount is calculated) and a cash payment
for any fractional shares or units of the worst performing asset on the expiry date (please refer to page 116 for
details of how this amount is calculated); or
(ii)
if you have elected for cash settlement — payment of an amount equal to the cash equivalent of the physical
settlement amount (less any cash settlement expenses) (please refer to page 116 for details of how the cash
equivalent of the physical settlement amount is calculated).
You will also receive on the settlement date any accrued potential cash dividend amount for the final calculation
period.
You should note that where the conditional put option is exercised by us, you will be obliged to buy the worst
performing asset on the expiry date from us at its exercise price. In this case, you will suffer a loss if the
market value of the physical settlement amount (together with any fractional shares or units of the worst
performing asset on the expiry date) (in both cases calculated based on the closing price of the worst
performing asset on the expiry date) or the cash equivalent of the physical settlement amount, together with
any potential cash dividend amount(s) paid during the scheduled tenor of the Basket DCDC ELIs, is less than
the original amount invested. In an extreme case, you will not receive any potential cash dividend amount for
the entire scheduled tenor and the physical settlement amount or its cash equivalent could be worth nothing
and you could lose all of your investment.
You should also note that, if you elect for physical settlement, the physical settlement amount will only be
delivered to you on the settlement date. Therefore, you will be exposed to any movement in the market price
of the worst performing asset on the expiry date during the period between the expiry date and the settlement
date. If you choose not to sell such worst performing asset on the settlement date, you will be exposed to the
market risk of holding such worst performing asset.
●
You should note that your payout under the Basket DCDC ELIs will be reduced by any distributor’s charges and any
cash settlement expenses or physical settlement expenses payable by you at expiry of the Basket DCDC ELIs.
— 28 —
Worst Case Scenario
The hypothetical example below does not reflect a complete analysis of all possible gain or loss scenarios. You must
not rely on it as an indication of the price performance of the reference assets in the basket or the payout on the Basket
DCDC ELIs.
The example below illustrates the worst case scenario where the worst performing asset in the basket of two reference
assets performs poorly during the investment period of the Basket DCDC ELIs.
Performance of reference assets (%)
C-19
An at-expiry knock-in event occurred
125
Call Price (% of initial spot price)
100
Exercise Price; Floor Price (% of initial spot price)
75
Knock-in Price (% of initial spot price)
50
25
Investment period
0
Trade Date
1st Calculation Period
End Date/1st Call Date
2nd Calculation Period
End Date
3rd Calculation Period
End Date
4th Calculation Period
End Date/Expiry Date/
Knock-in Event Date
Call Dates
(each trading day from (and including) the 1st calculation period end date to (and
excluding) the expiry date)
Performance of reference asset 1 (% of initial spot price)
Performance of reference asset 2 (% of initial spot price)
According to the above diagram, reference asset 2 is the worst performing asset in the basket throughout the investment
period (i.e. the period from and including the trade date to and including the expiry date) of the Basket DCDC ELIs.
The above example illustrates the following:
(i)
Potential Cash Dividend Payout
The potential cash dividend amount is (a) fixed for the 1st calculation period and (b) variable for each of the 2nd to the
4th calculation periods. You will receive the fixed potential cash dividend amount for the 1st calculation period regardless
of the price performance of the reference assets in the basket. Since the worst performing asset (i.e. reference asset 2)
closes below its floor price on each of the trading days from the 2nd to the 4th calculation periods, you will receive the
variable potential cash dividend amount (calculated by reference to the day-out cash dividend rate) for each of the 2nd
to the 4th calculation periods.
(ii)
Daily Autocall Condition Not Satisfied
The call dates are set as each trading day during the period from (and including) the 1st calculation period end date to
(and excluding) the expiry date. Since the worst performing asset (i.e. reference asset 2) closes below its call price on each
call date, the daily autocall condition is not satisfied and the Basket DCDC ELIs will not be early terminated.
— 29 —
(iii) At-expiry Knock-in Event Occurred
Since the worst performing asset (i.e. reference asset 2) closes below its knock-in price on the knock-in event date (i.e.
the expiry date), an at-expiry knock-in event has occurred. You will receive on the settlement date either physical delivery
of the physical settlement amount (together with a cash payment for any fractional shares or units of the worst performing
asset) or payment of the cash equivalent of the physical settlement amount. In this case, you will suffer a loss if the market
value of the physical settlement amount (together with any fractional shares or units of the worst performing asset) (in
both cases calculated based on the closing price of the worst performing asset on the expiry date) or the cash equivalent
of the physical settlement amount, together with any potential cash dividend amount(s) paid during the scheduled tenor
of the Basket DCDC ELIs is less than the original amount invested.
You should note that the above example assumes that the potential cash dividend amount is fixed for the 1st
calculation period, in which case you will receive such fixed potential cash dividend amount regardless of the price
performance of the reference assets in the basket. However, if the potential cash dividend amount is variable for
all of the calculation periods during the investment period of the Basket DCDC ELIs, it is possible that you may
not receive any potential cash dividend amount for the entire scheduled tenor. In an extreme case, you will not
receive any potential cash dividend amount for the entire scheduled tenor and the physical settlement amount or
its cash equivalent could be worth nothing and you could lose all of your investment.
Mode of Settlement at Expiry
When you place your purchase order for the Basket DCDC ELIs, you will need to specify whether you elect for cash
settlement or physical settlement upon expiry of your Basket DCDC ELIs in the case where an at-expiry knock-in event
has occurred. You can change your election at any time no later than 4:00 p.m. on the 3rd Hong Kong business day before
the expiry date. Please ask your distributor for details.
Adjustment to the terms and conditions and early termination of our Basket DCDC ELIs
Upon the occurrence of certain adjustment events (such as a potential adjustment event, a merger event or a tender offer)
affecting a reference asset in the basket, we can adjust some of the terms of our Basket DCDC ELIs (including adjusting
the exercise price, the call price, the floor price and the knock-in price of the affected reference asset) to account for that
event so as to preserve the economic equivalence of the Basket DCDC ELIs. If we determine that any adjustment to the
terms of the Basket DCDC ELIs is not appropriate to account for the relevant merger event or tender offer and to preserve
the economic equivalence of the Basket DCDC ELIs, we will seek to substitute the affected reference asset with another
reference asset in accordance with the terms and conditions of our Basket DCDC ELIs and make any further adjustments
to the terms of the Basket DCDC ELIs as we think fit (acting in good faith and in a commercially reasonable manner)
to account for the relevant merger event or tender offer. If we determine that substitution is not appropriate, we will early
terminate our Basket DCDC ELIs in accordance with the terms and conditions of our Basket DCDC ELIs.
Upon the occurrence of certain termination events (such as an insolvency or a delisting) affecting a reference asset in the
basket, we will seek to substitute the affected reference asset with another reference asset in accordance with the terms
and conditions of our Basket DCDC ELIs and make any further adjustments to the terms of the Basket DCDC ELIs as
we think fit (acting in good faith and in a commercially reasonable manner) to account for the relevant termination event.
If we determine that substitution is not appropriate, we will early terminate our Basket DCDC ELIs in accordance with
the terms and conditions of our Basket DCDC ELIs.
Upon the occurrence of certain market disruption events, we can postpone some of the key dates relevant to the terms of
our Basket DCDC ELIs. Any adjustments or substitution or early termination will be determined by us in our sole and
absolute discretion acting in good faith and in a commercially reasonable manner. Please refer to the summary table on
pages 93 to 99 of this product booklet for further details.
— 30 —
What charges do I have to pay?
Cash Settlement Expenses — If a settlement amount in cash is payable, you will have to pay for any expenses incurred
by us in connection with making the payment of the settlement amount in cash to you, including, for example, any taxes
and duties arising from the expiry of the Basket DCDC ELIs. Currently there are no such expenses. If such expenses are
payable in the future, we will notify the distributor(s) who will in turn inform you in advance.
Physical Settlement Expenses — Before the physical settlement amount is delivered to you on the settlement date, you
will have to pay for all out-of-pocket expenses relating to the transfer and receipt of the physical settlement amount,
including buyer’s stamp duty, transaction levies, registration charges and any other charges levied by your distributor (see
also “Distributor’s charges” below).
Distributor’s charges — Your distributor may charge you fees (including any charges for opening and maintaining a
securities account or an investment account with the distributor and any handling fee in relation to the Basket DCDC
ELIs). Please contact your distributor for details.
Cash settlement expenses, physical settlement expenses and distributor’s charges will affect the potential gain or
loss you get on your investment.
How can I buy the Basket DCDC ELIs?
If you would like to buy our Basket DCDC ELIs, you will have to place your Basket DCDC ELI purchase order with your
distributor. You can contact the appointed distributor(s) to enquire about the Basket DCDC ELIs on offer and the
application procedures. Your distributor will inform you of the purchase consideration (being the issue price) and any
applicable charges.
Once you place your Basket DCDC ELI purchase order with your distributor on the order date, you are committed to
purchase the Basket DCDC ELIs unless the post-sale cooling-off period is applicable (see section below on “Is there a
post-sale cooling-off period for our Basket DCDC ELIs?”) or you have cancelled your order within the specified period
of time as notified by your distributor following the publication of an updated programme memorandum and/or an
addendum to the programme memorandum and/or this product booklet during the offer period after you have placed your
order.
Your purchase order will be executed by us on the trade date and your distributor will pay the purchase consideration
(being the issue price) to us on your behalf on the issue date (being 6 to 10 business days after the trade date). Please
contact you distributor for details on how and when you have to pay the issue price to your distributor. A contract note
prepared by your distributor containing all the finalised commercial terms will be sent to you by your distributor within
2 Hong Kong business days after the trade date.
Is there a post-sale cooling-off period for our Basket DCDC ELIs?
Basket DCDC ELIs with an investment period of more than one year
If you have purchased a Basket DCDC ELI with an investment period (i.e. the period from (and including) the trade date
to (and including) the expiry date) of more than one year, you can choose to cancel or unwind the whole (and not part
of) your Basket DCDC ELI purchase order during the period from (and including) the date you place your purchase order
to (and including) the 5th Hong Kong business day after that date (this period is referred to as the “post-sale cooling-off
period”) by submitting your instructions to your distributor between 10:00 a.m. and 12:00 noon on any Hong Kong
business day during the post-sale cooling-off period.
— 31 —
C-2(o)
If you submit your instructions to cancel your Basket DCDC ELI purchase order to your distributor before your Basket
DCDC ELI purchase order has been executed on the trade date, your distributor will not pay the issue price to us on your
behalf on the issue date. If you submit your instructions to unwind your Basket DCDC ELI purchase order to your
distributor after your Basket DCDC ELI purchase order has been executed on the trade date, your distributor will pay the
issue price to us on your behalf on the issue date and we will pay your distributor a cash amount equal to the issue price
less any market value adjustments on the later of: (i) the 3rd business day after the day you submit your instructions to
unwind your Basket DCDC ELI purchase order; or (ii) the issue date.
In both cases, your distributor may charge you a handling fee when you cancel or unwind your Basket DCDC ELI
purchase order and (if applicable) such handling fee will be deducted from the cash amount returned to you. Please check
with your distributor for further details of when you will receive such cash amount from your distributor. The cash
amount returned to you may be substantially less than the original amount invested. In either case, the distributor’s
commission (if any) will not be deducted from the issue price or cash amount returned to you.
Basket DCDC ELIs with an investment period of one year or less
Please note that your right to cancel or unwind your Basket DCDC ELI purchase order during the post-sale cooling-off
period DOES NOT apply to Basket DCDC ELIs with an investment period of one year or less.
Is there any market making arrangement for your Basket DCDC ELIs before expiry?
Our Basket DCDC ELIs are not listed on any stock exchange. We (as market agent) will provide limited market making
arrangements for all our Basket DCDC ELIs (regardless of the length of the investment period and the scheduled tenor)
on each market making day falling every other Tuesday after the issue date up to the 3rd Hong Kong business day before
the expiry date. On each market making day, we (as market agent) will provide (via the distributor(s)): (i) indicative bid
prices (on a per-Basket DCDC ELI basis) during normal business hours; and (ii) a firm bid price (on a per-Basket DCDC
ELI basis) upon your request, provided that such request is submitted to your distributor between the opening of the
morning session of the Hong Kong Stock Exchange and the close of the morning session of the Hong Kong Stock
Exchange on such market making day. You may choose to sell part of or the entire holding of your Basket DCDC ELIs
provided that the minimum sell back order is equal to one Basket DCDC ELI and the total amount of Basket DCDC ELIs
you wish to sell is an integral number.
The indicative bid prices will be determined by us taking into account certain factors as set out on page 125 of this product
booklet. The indicative bid prices are provided for your reference only as they will be subject to intra-day change and may
not be the same as the firm bid price at which we are willing to buy back your Basket DCDC ELIs. Upon your request
for a firm bid price, we (as market agent) will determine such firm bid price based on the indicative bid price and the
prevailing market conditions at the time of your request. We will notify your distributor of such firm bid price and your
distributor will in turn inform you. You should note that the firm bid price provided to you by your distributor will
only be valid for a limited period of time as notified to you by your distributor. Upon acceptance of the firm bid price
by you within that specified period of time, we will buy back your Basket DCDC ELIs at that firm bid price on that market
making day. Your distributor may also charge you a handling fee when you sell your Basket DCDC ELIs back to us on
a market making day. You should note that the amount you receive from selling your Basket DCDC ELIs back to us
on a market making day will be reduced by any distributor’s fees or charges and may be substantially less than
the original amount invested.
If you choose to sell your Basket DCDC ELIs back to us on a market making day, we will deliver the sale proceeds of
your Basket DCDC ELIs to your distributor on the 3rd business day after that market making day. Please check with your
distributor for further details.
Please also note that indicative bid prices and/or firm bid prices and/or market making activities may not be
available on a market making day if certain events or technical problems occur (in which case the affected market
making day will be postponed to the next Hong Kong business day on which the Hong Kong Stock Exchange is open
for trading which is not affected by any of these events or problems).
— 32 —
C-39
How can I find out the indicative bid price of my Basket DCDC ELIs?
C-39
We (as market agent) will make available (via the distributor(s)) indicative bid prices for all our Basket DCDC ELIs on
each market making day. We will not upload such information onto our website and you will need to contact your
distributor for further details on the most effective way to access the indicative bid prices.
Additional Information
A.
Basket DCDC ELI offering documents
The following Basket DCDC ELI offering documents contain detailed information about HSBC, the Programme
and the Basket DCDC ELIs. You should read all of these documents before deciding whether to invest in our Basket
DCDC ELIs:
(i)
the relevant indicative term sheet for the series of the Basket DCDC ELIs you would like to buy;
(ii)
the Programme Memorandum dated 22 July 2011 together with any addendum as stated in the relevant term sheet;
and
(iii) this Product Booklet together with any addendum as stated in the relevant term sheet.
The distributor(s) has an obligation to distribute to you ALL of the above documents in English or
Chinese as you may prefer.
B.
Ongoing disclosure by HSBC
C-38
HSBC will keep the SFC and the distributor(s) informed as soon as reasonably practicable if (i) HSBC (as issuer) ceases
to meet any core requirements in Appendix A to the Code; (ii) HSBC (as product arranger) ceases to meet any eligibility
requirements in 4.2 of the Code; and (iii) to the extent permitted by any applicable law, changes in our financial condition
or other circumstances which could reasonably be expected to have a material adverse effect on our ability (as issuer) to
fulfil our commitment in connection with our Basket DCDC ELIs. Your distributor will in turn inform you. Please contact
your distributor for further details.
If you would like to enquire about our Basket DCDC ELIs, visit any designated branches of the appointed distributor(s)
for the Basket DCDC ELIs.
— 33 —
Key Facts Statement (D)
C-6
Non-Principal Protected Unlisted Daily Cash Dividend Callable Equity Linked
Investments Linked to a Basket of Securities (Basket DCDC ELIs) with Periodic
Autocall Condition and No Knock-in Feature
issued by
The Hongkong and Shanghai Banking Corporation Limited (HSBC)
We may issue six variations of Basket DCDC ELIs. This key facts statement only provides you with the key
information about one variation of Basket DCDC ELIs that we may issue: Basket DCDC ELIs with periodic autocall
condition. The knock-in feature does not apply to this variation of Basket DCDC ELIs.
This key facts statement does not contain all the information that may be important to you as an investor in our
Basket DCDC ELIs and your investment decision should not be made solely on the basis of the information
contained in this key facts statement. You should read the remaining sections of this product booklet (in particular,
the section headed “Risk Warnings”) and the other Basket DCDC ELI offering documents before deciding whether
to invest in our Basket DCDC ELIs.
If you are in any doubt about any of the contents of the Basket DCDC ELI offering documents, you should obtain
independent professional advice.
IMPORTANT RISK WARNINGS
●
Structured Investment Product
Our Basket DCDC ELIs are NOT equivalent to time deposits. They are structured investment products which are
embedded with derivatives.
●
Not Principal Protected
Our Basket DCDC ELIs are not principal protected: you could lose all of your investment.
●
Limited Maximum Potential Gain; you may not receive any potential cash dividend amount
The maximum potential gain under this product is capped at the maximum periodic potential cash dividend
amount(s) payable during the scheduled tenor (i.e. the period from (and including) the issue date to (and
including) the settlement date) of the Basket DCDC ELIs (less any cash settlement expenses). It is possible that
you may not receive any potential cash dividend amount for the entire scheduled tenor of the Basket DCDC ELIs.
●
Potential Payout determined by the Worst Performing Asset
The potential payout under our Basket DCDC ELIs is linked to the performance of the worst performing asset
in the basket (determined by us on each trading day based on the closing price of each reference asset in the
basket on such day). The worst performing asset on each trading day can be different. It will not matter how well
the other reference assets in the basket perform: the potential payout on our Basket DCDC ELIs is always
determined by the asset which performs worst out of all the reference assets in the basket.
●
No Collateral
Our Basket DCDC ELIs are not secured on any of our assets or any collateral.
●
Limited Market Making Arrangements
Our Basket DCDC ELIs are designed to be held to their expiry date. We (as market agent) will provide limited
market making arrangements on a bi-weekly basis for all our Basket DCDC ELIs. If you try to sell your Basket
DCDC ELIs before expiry, you may receive an amount which is substantially less than the original amount
invested.
●
Not the same as Investing in the Reference Assets
Investing in our Basket DCDC ELIs is not the same as investing in the reference assets. Changes in the market
price of the reference assets may not lead to a corresponding change in the market value of, or your potential
payout under, the Basket DCDC ELIs.
— 34 —
C-34(c)
●
Re-investment Risk
Our Basket DCDC ELIs contain an autocall condition. If the autocall condition is satisfied, the Basket DCDC ELIs
will be terminated before expiry and no further potential cash dividend amount will be payable following
termination. You may not be able to enjoy the same rate of return if you re-invest in other investments with similar
risk parameters.
●
Not Covered by Investor Compensation Fund
Our Basket DCDC ELIs are not listed on any stock exchange and are not covered by the Investor Compensation
Fund.
●
Maximum Loss upon HSBC’s Default or Insolvency
Our Basket DCDC ELIs constitute general, unsecured and unsubordinated contractual obligations of HSBC as
issuer, and of no other person (including the ultimate holding company of our group, HSBC Holdings plc). When
you buy our Basket DCDC ELIs, you will be relying on HSBC’s creditworthiness. If HSBC becomes insolvent or
defaults on its obligations under the Basket DCDC ELIs, in the worst case scenario, you could lose all of your
investment.
●
English version of the terms and conditions prevails over Chinese version
For the purpose of lodgement with the relevant clearing system(s), the global certificate representing a series of
Basket DCDC ELIs and the terms and conditions of the Basket DCDC ELIs are issued in the English language only.
If there is any inconsistency between the Chinese version of the terms and conditions of our Basket DCDC ELIs and
the English version, the English version will prevail over the Chinese version. If you do not understand the English
version, you should obtain independent professional advice.
●
Exposure to risk from trade date
You should note that as all the commercial variables of our Basket DCDC ELIs are determined on the trade date,
you will be subject to the terms and conditions of our Basket DCDC ELIs from the trade date and you will be
exposed to the market risk and the price movement of the reference assets from the trade date which may affect the
market value of the Basket DCDC ELIs.
●
Conflicts of Interest
You should note that potential and actual conflicts of interest may arise from the different roles played by us and
our subsidiaries and affiliates in connection with our Basket DCDC ELIs.
●
You do not have direct contractual rights to enforce our Basket DCDC ELIs
You do not have direct contractual rights against us as the issuer to enforce our Basket DCDC ELIs. To assert your
rights as an investor in our Basket DCDC ELIs, you will have to rely on your distributor (directly or indirectly via
its custodian) to take action on your behalf. If your distributor fails to take action in accordance with your
instructions or if your distributor’s custodian fails to take action in accordance with the instructions of your
distributor, or your distributor or its custodian becomes insolvent or defaults on its obligations, you will need to take
action against your distributor in accordance with the terms of arrangement between you and your distributor.
C-34(d)
Commissions:
We may pay a commission to the distributor(s). Distributor(s)’ commissions and other transaction costs including our cost
of hedging are factored into the original issue price of the Basket DCDC ELIs.
What are Basket DCDC ELIs with Periodic Autocall Condition and no Knock-in Feature?
A.
Overview
●
Basket DCDC ELIs are structured investment products which contain an embedded conditional put option over the
reference assets in the basket. If you purchase a Basket DCDC ELI, you will be selling a conditional put option
over the reference assets in the basket to us. If certain conditions are met, you will be obliged to buy the worst
performing asset on the expiry date from us at its exercise price (as further described in the sub-section headed “E.
At Expiry” below).
●
Payout under the Basket DCDC ELIs is linked to the price performance of the worst performing asset in the basket.
The basket of reference assets may comprise a minimum of two and a maximum of six shares in companies and/or
units of funds listed on the Hong Kong Stock Exchange and quoted in Hong Kong dollars. Not all Hong Kong-listed
shares or funds can be used as a reference asset, you should check with your distributor what kind of reference assets
are available.
— 35 —
C-2(b)
(c)(d)
(f)
●
Our Basket DCDC ELIs will be denominated and settled in Hong Kong dollars, United States dollars or other
non-restricted and freely convertible currencies as specified in the relevant term sheet. If the settlement currency of
the Basket DCDC ELIs is different from Hong Kong dollars (being the currency in which the reference assets trade),
we will convert one currency into another at the exchange rate as specified in the relevant term sheet in making
calculations under the Basket DCDC ELIs (if applicable).
●
You can buy a Basket DCDC ELI at its issue price, which is equal to the nominal amount of the Basket DCDC ELI.
The nominal amount of a Basket DCDC ELI is equivalent to the face amount of the Basket DCDC ELI and will be
specified in the relevant term sheet. The minimum investment amount is HKD100,000 (or its equivalent in foreign
currency).
●
The key features of our Basket DCDC ELIs with periodic autocall condition and no knock-in feature are set out
below:
Basket DCDC ELIs with:
A. Potential Cash Dividend Amount
Periodic Autocall Condition and no Knock-in Feature
May receive potential periodic cash dividend amount
if certain conditions are met
Periodic autocall condition applies
Not applicable
B. Autocall Condition
C. Knock-in Event
●
You should note that while you place your Basket DCDC ELI purchase order(s) during the offer period, all of the
commercial variables in relation to the reference assets (including the initial spot prices, the exercise prices, the call
prices and the floor prices of the reference assets) that are used to determine the payout of your Basket DCDC ELI
will only be recorded and determined on the trade date after you have purchased the Basket DCDC ELI. The initial
spot price of a reference asset is either (i) the closing price of that reference asset on the trade date or (ii) the
prevailing market price of that reference asset as quoted by the Hong Kong Stock Exchange at the time your Basket
DCDC ELI purchase order is executed on the trade date. A contract note prepared by your distributor containing all
the finalised commercial terms that apply to your Basket DCDC ELI will be sent to you by your distributor within
2 Hong Kong business days after the trade date.
B.
How to determine the worst performing asset?
●
The price performance of the worst performing asset in the basket will determine (i) whether the periodic autocall
condition has been met; and (ii) the total payout under our Basket DCDC ELIs.
The reference asset in the basket with the lowest “performance” on a particular trading day will be the worst
performing asset for that trading day. The worst performing asset on each trading day can be different. We will use
the following formula to determine the “performance” for each reference asset on a trading day:
Performance =
Closing price of the reference asset on a trading day
Initial spot price of the reference asset
x 100%
If there is more than one reference asset with the same lowest “performance” on a particular trading day, we will,
in our sole and absolute discretion acting in good faith and in a commercially reasonable manner, decide which one
is the worst performing asset for that trading day.
C.
Payment of Potential Cash Dividend Amount(s)
●
The relevant term sheet will specify whether the potential cash dividend amount for a calculation period is:
●
(i)
a variable amount calculated according to the variable accrual formula (see “Variable Potential Cash Dividend
Amount” below); or
(ii)
a fixed amount (see “Fixed Potential Cash Dividend Amount” below).
You should note that it is possible that you may not receive any potential cash dividend amount for the entire
scheduled tenor of the Basket DCDC ELIs.
— 36 —
C-2(i)
●
Variable Potential Cash Dividend Amount
If the potential cash dividend amount for a calculation period is specified in the term sheet to be a variable amount,
we will determine whether such variable potential cash dividend amount is payable by reference to the price
performance of the worst performing asset in the basket on each trading day. The variable potential cash dividend
amount will be calculated according to the following variable accrual formula:
x
Days in
Total days
(II) Nominal amount x Day-out cash dividend rate x
Days out
Total days
(I) Nominal amount x
Day-in cash dividend rate
PLUS
‘Days in’ means the total number of trading days in a calculation period on which the closing price of the worst
performing asset (determined by us on each trading day based on the closing price of each reference asset in the
basket on such day) is at or above its floor price.
‘Days out’ means the total number of trading days in a calculation period on which the closing price of the worst
performing asset (determined by us on each trading day based on the closing price of each reference asset in the
basket on such day) is below its floor price.
‘Total days’ mean the total number of trading days in a calculation period.
The floor price of each reference asset is set at a specified percentage of its initial spot price and will be set out in
the relevant term sheet. The specified percentage used to calculate the floor price of each reference asset for each
relevant trading day during all of the calculation periods will be the same.
The day-in cash dividend rate and the day-out cash dividend rate will be specified in the relevant term sheet. The
day-out cash dividend rate can be set at zero.
●
Fixed Potential Cash Dividend Amount
If the potential cash dividend amount for a calculation period is specified in the term sheet to be a fixed amount,
such fixed potential cash dividend amount is payable regardless of the price performance of the reference assets in
the basket. The fixed potential cash dividend amount will be calculated according to the following formula:
Nominal amount x Fixed cash dividend rate
D.
Periodic Autocall Condition
●
The periodic autocall condition is satisfied if the closing price of the worst performing asset is at or above its call
price on a call date, which is set as certain calculation period end dates (excluding the expiry date) as set out in the
relevant term sheet.
●
The call price of each reference asset is set at a specified percentage of its initial spot price and will be set out in
the relevant term sheet. The specified percentage used to calculate the call price of each reference asset on each call
date will be the same. The call price may be set at a level which is higher than, equal to or lower than the exercise
price.
●
If the periodic autocall condition is satisfied on a call date, we will terminate the Basket DCDC ELIs on that call
date. You will receive on the early settlement date (being the 3rd business day after that call date) the nominal
amount of the Basket DCDC ELIs and any accrued potential cash dividend amount calculated up to (and including)
that call date (less any cash settlement expenses).
— 37 —
E.
At Expiry
●
If the periodic autocall condition is not satisfied on any of the relevant call dates and the Basket DCDC ELIs have
not otherwise been early terminated, we will determine the final settlement payout under the Basket DCDC ELIs
on the expiry date. For this variation of Basket DCDC ELIs, the final settlement payout will depend on:
C-2(i)
(i)
the amount of any accrued potential cash dividend amount payable for the final calculation period (see also
“C. Payment of Potential Cash Dividend Amount(s)” above); and
(ii)
the closing price of the worst performing asset on the expiry date compared to its exercise price AND its call
price.
●
The exercise price of each reference asset may be expressed as a specified percentage of its initial spot price or in
a range of percentages of its initial spot price (such range will be no wider than Ⳳ2.5%) in the relevant term sheet.
The specified percentage (or if applicable, range of percentages) used to calculate the exercise price of each
reference asset will be the same.
●
If the closing price of the worst performing asset on the expiry date is at or above EITHER its exercise price OR
its call price, we will pay you on the settlement date (being the 3rd business day after the expiry date) a cash amount
equal to the nominal amount of the Basket DCDC ELIs and any accrued potential cash dividend amount for the final
calculation period (less any cash settlement expenses).
●
If the closing price of the worst performing asset on the expiry date is below BOTH its exercise price AND its call
price, the conditional put option will be exercised by us at expiry of the Basket DCDC ELIs and you will receive
on the settlement date (being the 3rd business day after the expiry date) either:
(i)
if you have elected for physical settlement — physical delivery of a number of the worst performing asset on
the expiry date (being the physical settlement amount) after payment of all physical settlement expenses
(please refer to page 115 for details of how the physical settlement amount is calculated) and a cash payment
for any fractional shares or units of the worst performing asset on the expiry date (please refer to page 116 for
details of how this amount is calculated); or
(ii)
if you have elected for cash settlement — payment of an amount equal to the cash equivalent of the physical
settlement amount (less any cash settlement expenses) (please refer to page 116 for details of how the cash
equivalent of the physical settlement amount is calculated).
You will also receive on the settlement date any accrued potential cash dividend amount for the final calculation
period.
You should note that where the conditional put option is exercised by us, you will be obliged to buy the worst
performing asset on the expiry date from us at its exercise price. In this case, you will suffer a loss if the
market value of the physical settlement amount (together with any fractional shares or units of the worst
performing asset on the expiry date) (in both cases calculated based on the closing price of the worst
performing asset on the expiry date) or the cash equivalent of the physical settlement amount, together with
any potential cash dividend amount(s) paid during the scheduled tenor of the Basket DCDC ELIs, is less than
the original amount invested. In an extreme case, you will not receive any potential cash dividend amount for
the entire scheduled tenor and the physical settlement amount or its cash equivalent could be worth nothing
and you could lose all of your investment.
You should also note that, if you elect for physical settlement, the physical settlement amount will only be
delivered to you on the settlement date. Therefore, you will be exposed to any movement in the market price
of the worst performing asset on the expiry date during the period between the expiry date and the settlement
date. If you choose not to sell such worst performing asset on the settlement date, you will be exposed to the
market risk of holding such worst performing asset.
●
You should note that your payout under the Basket DCDC ELIs will be reduced by any distributor’s charges and any
cash settlement expenses or physical settlement expenses payable by you at expiry of the Basket DCDC ELIs.
— 38 —
Worst Case Scenario
The hypothetical example below does not reflect a complete analysis of all possible gain or loss scenarios. You must
not rely on it as an indication of the price performance of the reference assets in the basket or the payout on the Basket
DCDC ELIs.
The example below illustrates the worst case scenario where the worst performing asset in the basket of two reference
assets performs poorly during the investment period of the Basket DCDC ELIs.
Performance of reference assets (%)
C-19
125
Call Price (% of initial spot price)
100
Exercise Price; Floor Price (% of initial spot price)
75
50
25
Investment period
0
1st Calculation Period
End Date/1st Call Date
Trade Date
2nd Calculation Period
End Date/2nd Call Date
3rd Calculation Period
End Date/3rd Call Date
4th Calculation Period
End Date/Expiry Date
Performance of reference asset 1 (% of initial spot price)
Performance of reference asset 2 (% of initial spot price)
According to the above diagram, reference asset 2 is the worst performing asset in the basket throughout the investment
period (i.e. the period from and including the trade date to and including the expiry date) of the Basket DCDC ELIs.
The above example illustrates the following:
(i)
Potential Cash Dividend Payout
The potential cash dividend amount is (a) fixed for the 1st calculation period and (b) variable for each of the 2nd to the
4th calculation periods. You will receive the fixed potential cash dividend amount for the 1st calculation period regardless
of the price performance of the reference assets in the basket. Since the worst performing asset (i.e. reference asset 2)
closes below its floor price on each of the trading days from the 2nd to the 4th calculation periods, you will receive the
variable potential cash dividend amount (calculated by reference to the day-out cash dividend rate) for each of the 2nd
to the 4th calculation periods.
(ii)
Periodic Autocall Condition Not Satisfied
The call dates are set as each of the calculation period end dates (excluding the expiry date). Since the worst performing
asset (i.e. reference asset 2) closes below its call price on each call date, the periodic autocall condition is not satisfied
and the Basket DCDC ELIs will not be early terminated.
(iii) At Expiry
Since the worst performing asset (i.e. reference asset 2) closes below its exercise price and its call price on the expiry date,
you will receive on the settlement date either physical delivery of the physical settlement amount (together with a cash
payment for any fractional shares or units of the worst performing asset) or payment of the cash equivalent of the physical
settlement amount. In this case, you will suffer a loss if the market value of the physical settlement amount (together with
— 39 —
any fractional shares or units of the worst performing asset) (in both cases calculated based on the closing price of the
worst performing asset on the expiry date) or the cash equivalent of the physical settlement amount, together with any
potential cash dividend amount(s) paid during the scheduled tenor of the Basket DCDC ELIs is less than the original
amount invested.
You should note that the above example assumes that the potential cash dividend amount is fixed for the 1st
calculation period, in which case you will receive such fixed potential cash dividend amount regardless of the price
performance of the reference assets in the basket. However, if the potential cash dividend amount is variable for
all of the calculation periods during the investment period of the Basket DCDC ELIs, it is possible that you may
not receive any potential cash dividend amount for the entire scheduled tenor. In an extreme case, you will not
receive any potential cash dividend amount for the entire scheduled tenor and the physical settlement amount or
its cash equivalent could be worth nothing and you could lose all of your investment.
Mode of Settlement at Expiry
When you place your purchase order for the Basket DCDC ELIs, you will need to specify whether you elect for cash
settlement or physical settlement upon expiry of your Basket DCDC ELIs in the case where the closing price of the worst
performing asset on the expiry date is below its exercise price and the call price. You can change your election at any time
no later than 4:00 p.m. on the 3rd Hong Kong business day before the expiry date. Please ask your distributor for details.
Adjustment to the terms and conditions and early termination of our Basket DCDC ELIs
Upon the occurrence of certain adjustment events (such as a potential adjustment event, a merger event or a tender offer)
affecting a reference asset in the basket, we can adjust some of the terms of our Basket DCDC ELIs (including adjusting
the exercise price, the call price and the floor price of the affected reference asset) to account for that event so as to
preserve the economic equivalence of the Basket DCDC ELIs. If we determine that any adjustment to the terms of the
Basket DCDC ELIs is not appropriate to account for the relevant merger event or tender offer and to preserve the
economic equivalence of the Basket DCDC ELIs, we will seek to substitute the affected reference asset with another
reference asset in accordance with the terms and conditions of our Basket DCDC ELIs and make any further adjustments
to the terms of the Basket DCDC ELIs as we think fit (acting in good faith and in a commercially reasonable manner)
to account for the relevant merger event or tender offer. If we determine that substitution is not appropriate, we will early
terminate our Basket DCDC ELIs in accordance with the terms and conditions of our Basket DCDC ELIs.
Upon the occurrence of certain termination events (such as an insolvency or a delisting) affecting a reference asset in the
basket, we will seek to substitute the affected reference asset with another reference asset in accordance with the terms
and conditions of our Basket DCDC ELIs and make any further adjustments to the terms of the Basket DCDC ELIs as
we think fit (acting in good faith and in a commercially reasonable manner) to account for the relevant termination event.
If we determine that substitution is not appropriate, we will early terminate our Basket DCDC ELIs in accordance with
the terms and conditions of our Basket DCDC ELIs.
Upon the occurrence of certain market disruption events, we can postpone some of the key dates relevant to the terms of
our Basket DCDC ELIs. Any adjustments or substitution or early termination will be determined by us in our sole and
absolute discretion acting in good faith and in a commercially reasonable manner. Please refer to the summary table on
pages 93 to 99 of this product booklet for further details.
What charges do I have to pay?
Cash Settlement Expenses — If a settlement amount in cash is payable, you will have to pay for any expenses incurred
by us in connection with making the payment of the settlement amount in cash to you, including, for example, any taxes
and duties arising from the expiry of the Basket DCDC ELIs. Currently there are no such expenses. If such expenses are
payable in the future, we will notify the distributor(s) who will in turn inform you in advance.
Physical Settlement Expenses — Before the physical settlement amount is delivered to you on the settlement date, you
will have to pay for all out-of-pocket expenses relating to the transfer and receipt of the physical settlement amount,
including buyer’s stamp duty, transaction levies, registration charges and any other charges levied by your distributor (see
also “Distributor’s charges” below).
— 40 —
Distributor’s charges — Your distributor may charge you fees (including any charges for opening and maintaining a
securities account or an investment account with the distributor and any handling fee in relation to the Basket DCDC
ELIs). Please contact your distributor for details.
Cash settlement expenses, physical settlement expenses and distributor’s charges will affect the potential gain or
loss you get on your investment.
How can I buy the Basket DCDC ELIs?
If you would like to buy our Basket DCDC ELIs, you will have to place your Basket DCDC ELI purchase order with your
distributor. You can contact the appointed distributor(s) to enquire about the Basket DCDC ELIs on offer and the
application procedures. Your distributor will inform you of the purchase consideration (being the issue price) and any
applicable charges.
Once you place your Basket DCDC ELI purchase order with your distributor on the order date, you are committed to
purchase the Basket DCDC ELIs unless the post-sale cooling-off period is applicable (see section below on “Is there a
post-sale cooling-off period for our Basket DCDC ELIs?”) or you have cancelled your order within the specified period
of time as notified by your distributor following the publication of an updated programme memorandum and/or an
addendum to the programme memorandum and/or this product booklet during the offer period after you have placed your
order.
Your purchase order will be executed by us on the trade date and your distributor will pay the purchase consideration
(being the issue price) to us on your behalf on the issue date (being 6 to 10 business days after the trade date). Please
contact your distributor for details on how and when you have to pay the issue price to your distributor. A contract note
prepared by your distributor containing all the finalised commercial terms will be sent to you by your distributor within
2 Hong Kong business days after the trade date.
Is there a post-sale cooling-off period for our Basket DCDC ELIs?
Basket DCDC ELIs with an investment period of more than one year
If you have purchased a Basket DCDC ELI with an investment period (i.e. the period from (and including) the trade date
to (and including) the expiry date) of more than one year, you can choose to cancel or unwind the whole (and not part
of) your Basket DCDC ELI purchase order during the period from (and including) the date you place your purchase order
to (and including) the 5th Hong Kong business day after that date (this period is referred to as the “post-sale cooling-off
period”) by submitting your instructions to your distributor between 10:00 a.m. and 12:00 noon on any Hong Kong
business day during the post-sale cooling-off period.
If you submit your instructions to cancel your Basket DCDC ELI purchase order to your distributor before your Basket
DCDC ELI purchase order has been executed on the trade date, your distributor will not pay the issue price to us on your
behalf on the issue date. If you submit your instructions to unwind your Basket DCDC ELI purchase order to your
distributor after your Basket DCDC ELI purchase order has been executed on the trade date, your distributor will pay the
issue price to us on your behalf on the issue date and we will pay your distributor a cash amount equal to the issue price
less any market value adjustments on the later of: (i) the 3rd business day after the day you submit your instructions to
unwind your Basket DCDC ELI purchase order; or (ii) the issue date.
In both cases, your distributor may charge you a handling fee for the when you cancel or unwind your Basket DCDC ELI
purchase order and (if applicable) such handling fee will be deducted from the cash amount returned to you. Please check
with your distributor for further details of when you will receive such cash amount from your distributor. The cash
amount returned to you may be substantially less than the original amount invested. In either case, the distributor’s
commission (if any) will not be deducted from the issue price or cash amount returned to you.
— 41 —
C-2(o)
Basket DCDC ELIs with an investment period of one year or less
Please note that your right to cancel or unwind your Basket DCDC ELI purchase order during the post-sale cooling-off
period DOES NOT apply to Basket DCDC ELIs with an investment period of one year or less.
Is there any market making arrangement for your Basket DCDC ELIs before expiry?
C-39
Our Basket DCDC ELIs are not listed on any stock exchange. We (as market agent) will provide limited market making
arrangements for all our Basket DCDC ELIs (regardless of the length of the investment period and the scheduled tenor)
on each market making day falling every other Tuesday after the issue date up to the 3rd Hong Kong business day before
the expiry date. On each market making day, we (as market agent) will provide (via the distributor(s)): (i) indicative bid
prices (on a per-Basket DCDC ELI basis) during normal business hours; and (ii) a firm bid price (on a per-Basket DCDC
ELI basis) upon your request, provided that such request is submitted to your distributor between the opening of the
morning session of the Hong Kong Stock Exchange and the close of the morning session of the Hong Kong Stock
Exchange on such market making day. You may choose to sell part of or the entire holding of your Basket DCDC ELIs
provided that the minimum sell back order is equal to one Basket DCDC ELI and the total amount of Basket DCDC ELIs
you wish to sell is an integral number.
The indicative bid prices will be determined by us taking into account certain factors as set out on page 125 of this product
booklet. The indicative bid prices are provided for your reference only as they will be subject to intra-day change and may
not be the same as the firm bid price at which we are willing to buy back your Basket DCDC ELIs. Upon your request
for a firm bid price, we (as market agent) will determine such firm bid price based on the indicative bid price and the
prevailing market conditions at the time of your request. We will notify your distributor of such firm bid price and your
distributor will in turn inform you. You should note that the firm bid price provided to you by your distributor will
only be valid for a limited period of time as notified to you by your distributor. Upon acceptance of the firm bid price
by you within that specified period of time, we will buy back your Basket DCDC ELIs at that firm bid price on that market
making day. Your distributor may also charge you a handling fee when you sell your Basket DCDC ELIs back to us on
a market making day. You should note that the amount you receive from selling your Basket DCDC ELIs back to us
on a market making day will be reduced by any distributor’s fees or charges and may be substantially less than
the original amount invested.
If you choose to sell your Basket DCDC ELIs back to us on a market making day, we will deliver the sale proceeds of
your Basket DCDC ELIs to your distributor on the 3rd business day after that market making day. Please check with your
distributor for further details.
Please also note that indicative bid prices and/or firm bid prices and/or market making activities may not be
available on a market making day if certain events or technical problems occur (in which case the affected market
making day will be postponed to the next Hong Kong business day on which the Hong Kong Stock Exchange is open
for trading which is not affected by any of these events or problems).
How can I find out the indicative bid price of my Basket DCDC ELIs?
We (as market agent) will make available (via the distributor(s)) indicative bid prices for all our Basket DCDC ELIs on
each market making day. We will not upload such information onto our website and you will need to contact your
distributor for further details on the most effective way to access the indicative bid prices.
— 42 —
C-39
Additional Information
A.
Basket DCDC ELI offering documents
The following Basket DCDC ELI offering documents contain detailed information about HSBC, the Programme
and the Basket DCDC ELIs. You should read all of these documents before deciding whether to invest in our Basket
DCDC ELIs:
(i)
the relevant indicative term sheet for the series of the Basket DCDC ELIs you would like to buy;
(ii)
the Programme Memorandum dated 22 July 2011 together with any addendum as stated in the relevant term sheet;
and
(iii) this Product Booklet together with any addendum as stated in the relevant term sheet.
The distributor(s) has an obligation to distribute to you ALL of the above documents in English or
Chinese as you may prefer.
B.
Ongoing disclosure by HSBC
C-38
HSBC will keep the SFC and the distributor(s) informed as soon as reasonably practicable if (i) HSBC (as issuer) ceases
to meet any core requirements in Appendix A to the Code; (ii) HSBC (as product arranger) ceases to meet any eligibility
requirements in 4.2 of the Code; and (iii) to the extent permitted by any applicable law, changes in our financial condition
or other circumstances which could reasonably be expected to have a material adverse effect on our ability (as issuer) to
fulfil our commitment in connection with our Basket DCDC ELIs. Your distributor will in turn inform you. Please contact
your distributor for further details.
If you would like to enquire about our Basket DCDC ELIs, visit any designated branches of the appointed distributor(s)
for the Basket DCDC ELIs.
— 43 —
Key Facts Statement (E)
C-6
Non-Principal Protected Unlisted Daily Cash Dividend Callable Equity Linked
Investments Linked to a Basket of Securities (Basket DCDC ELIs) with Periodic
Autocall Condition and Daily Knock-in Feature
issued by
The Hongkong and Shanghai Banking Corporation Limited (HSBC)
We may issue six variations of Basket DCDC ELIs. This key facts statement only provides you with the key
information about one variation of Basket DCDC ELIs that we may issue: Basket DCDC ELIs with periodic autocall
condition and daily knock-in.
This key facts statement does not contain all the information that may be important to you as an investor in our
Basket DCDC ELIs and your investment decision should not be made solely on the basis of the information
contained in this key facts statement. You should read the remaining sections of this product booklet (in particular,
the section headed “Risk Warnings”) and the other Basket DCDC ELI offering documents before deciding whether
to invest in our Basket DCDC ELIs.
If you are in any doubt about any of the contents of the Basket DCDC ELI offering documents, you should obtain
independent professional advice.
IMPORTANT RISK WARNINGS
●
Structured Investment Product
Our Basket DCDC ELIs are NOT equivalent to time deposits. They are structured investment products which are
embedded with derivatives.
●
Not Principal Protected
Our Basket DCDC ELIs are not principal protected: you could lose all of your investment.
●
Limited Maximum Potential Gain; you may not receive any potential cash dividend amount
The maximum potential gain under this product is capped at the maximum periodic potential cash dividend
amount(s) payable during the scheduled tenor (i.e. the period from (and including) the issue date to (and
including) the settlement date) of the Basket DCDC ELIs (less any cash settlement expenses). It is possible that
you may not receive any potential cash dividend amount for the entire scheduled tenor of the Basket DCDC ELIs.
●
Potential Payout determined by the Worst Performing Asset
The potential payout under our Basket DCDC ELIs is linked to the performance of the worst performing asset
in the basket (determined by us on each trading day based on the closing price of each reference asset in the
basket on such day). The worst performing asset on each trading day can be different. It will not matter how well
the other reference assets in the basket perform: the potential payout on our Basket DCDC ELIs is always
determined by the asset which performs worst out of all the reference assets in the basket.
●
No Collateral
Our Basket DCDC ELIs are not secured on any of our assets or any collateral.
●
Limited Market Making Arrangements
Our Basket DCDC ELIs are designed to be held to their expiry date. We (as market agent) will provide limited
market making arrangements on a bi-weekly basis for all our Basket DCDC ELIs. If you try to sell your Basket
DCDC ELIs before expiry, you may receive an amount which is substantially less than the original amount
invested.
●
Not the same as Investing in the Reference Assets
Investing in our Basket DCDC ELIs is not the same as investing in the reference assets. Changes in the market
price of the reference assets may not lead to a corresponding change in the market value of, or your potential
payout under, the Basket DCDC ELIs.
— 44 —
C-34(c)
●
Re-investment Risk
Our Basket DCDC ELIs contain an autocall condition. If the autocall condition is satisfied, the Basket DCDC ELIs
will be terminated before expiry and no further potential cash dividend amount will be payable following
termination. You may not be able to enjoy the same rate of return if you re-invest in other investments with similar
risk parameters.
●
Not Covered by Investor Compensation Fund
Our Basket DCDC ELIs are not listed on any stock exchange and are not covered by the Investor Compensation
Fund.
●
Maximum Loss upon HSBC’s Default or Insolvency
Our Basket DCDC ELIs constitute general unsecured contractual obligations of HSBC as issuer, and of no other
person (including the ultimate holding company of our group, HSBC Holdings plc). When you buy our Basket
DCDC ELIs, you will be relying on HSBC’s creditworthiness. If HSBC becomes insolvent or defaults on its
obligations under the Basket DCDC ELIs, in the worst case scenario, you could lose all of your investment.
●
English version of the terms and conditions prevails over Chinese version
For the purpose of lodgement with the relevant clearing system(s), the global certificate representing a series of
Basket DCDC ELIs and the terms and conditions of the Basket DCDC ELIs are issued in the English language only.
If there is any inconsistency between the Chinese version of the terms and conditions of our Basket DCDC ELIs and
the English version, the English version will prevail over the Chinese version. If you do not understand the English
version, you should obtain independent professional advice.
●
Exposure to risk from trade date
You should note that as all the commercial variables of our Basket DCDC ELIs are determined on the trade date,
you will be subject to the terms and conditions of our Basket DCDC ELIs from the trade date and you will be
exposed to the market risk and the price movement of the reference assets from the trade date which may affect the
market value of the Basket DCDC ELIs.
●
Conflicts of Interest
You should note that potential and actual conflicts of interest may arise from the different roles played by us and
our subsidiaries and affiliates in connection with our Basket DCDC ELIs.
●
You do not have direct contractual rights to enforce our Basket DCDC ELIs
You do not have direct contractual rights against us as the issuer to enforce our Basket DCDC ELIs. To assert your
rights as an investor in our Basket DCDC ELIs, you will have to rely on your distributor (directly or indirectly via
its custodian) to take action on your behalf. If your distributor fails to take action in accordance with your
instructions or if your distributor’s custodian fails to take action in accordance with the instructions of your
distributor, or your distributor or its custodian becomes insolvent or defaults on its obligations, you will need to take
action against your distributor in accordance with the terms of arrangement between you and your distributor.
C-34(d)
Commissions:
We may pay a commission to the distributor(s). Distributor(s)’ commissions and other transaction costs including our cost
of hedging are factored into the original issue price of the Basket DCDC ELIs.
What are Basket DCDC ELIs with Periodic Autocall Condition and Daily Knock-in?
A.
Overview
●
Basket DCDC ELIs are structured investment products which contain an embedded conditional put option over the
reference assets in the basket. If you purchase a Basket DCDC ELI, you will be selling a conditional put option
over the reference assets in the basket to us. If certain conditions are met, you will be obliged to buy the worst
performing asset on the expiry date from us at its exercise price (as further described in the sub-section headed “E.
At Expiry” below).
●
Payout under the Basket DCDC ELIs is linked to the price performance of the worst performing asset in the basket.
The basket of reference assets may comprise a minimum of two and a maximum of six shares in companies and/or
units of funds listed on the Hong Kong Stock Exchange and quoted in Hong Kong dollars. Not all Hong Kong-listed
shares or funds can be used as a reference asset, you should check with your distributor what kind of reference assets
are available.
— 45 —
C-2(b)
(c)(d)
(f)
●
Our Basket DCDC ELIs will be denominated and settled in Hong Kong dollars, United States dollars or other
non-restricted and freely convertible currencies as specified in the relevant term sheet. If the settlement currency of
the Basket DCDC ELIs is different from Hong Kong dollars (being the currency in which the reference assets trade),
we will convert one currency into another at the exchange rate as specified in the relevant term sheet in making
calculations under the Basket DCDC ELIs (if applicable).
●
You can buy a Basket DCDC ELI at its issue price, which is equal to the nominal amount of the Basket DCDC ELIs.
The nominal amount of a Basket DCDC ELI is equivalent to the face amount of the Basket DCDC ELI and will be
specified in the relevant term sheet. The minimum investment amount is HKD100,000 (or its equivalent in foreign
currency).
●
The key features of our Basket DCDC ELIs with periodic autocall condition and daily knock-in are set out below:
Basket DCDC ELIs with:
A. Potential Cash Dividend Amount
Periodic Autocall Condition and Daily Knock-in
May receive potential periodic cash dividend amount
if certain conditions are met
Periodic autocall condition applies
Daily knock-in event applies
B. Autocall Condition
C. Knock-in Event
●
You should note that while you place your Basket DCDC ELI purchase order(s) during the offer period, all of the
commercial variables in relation to the reference assets (including the initial spot prices, the exercise prices, the call
prices, the floor prices and knock-in prices of the reference assets) that are used to determine the payout of your
Basket DCDC ELIs will only be recorded and determined on the trade date after you have purchased the Basket
DCDC ELI. The initial spot price of a reference asset is either (i) the closing price of that reference asset on the trade
date or (ii) the prevailing market price of that reference asset as quoted by the Hong Kong Stock Exchange at the
time your Basket DCDC ELI purchase order is executed on the trade date. A contract note prepared by your
distributor containing all the finalised commercial terms that apply to your Basket DCDC ELI will be sent to you
by your distributor within 2 Hong Kong business days after the trade date.
B.
How to determine the worst performing asset?
●
The price performance of the worst performing asset in the basket will determine (i) whether the daily knock-in
event has occurred; and (ii) the total payout under our Basket DCDC ELIs.
The reference asset in the basket with the lowest “performance” on a particular trading day will be the worst
performing asset for that trading day. The worst performing asset on each trading day can be different. We will use
the following formula to determine the “performance” for each reference asset on a trading day:
Performance =
Closing price of the reference asset on a trading day
Initial spot price of the reference asset
x 100%
If there is more than one reference asset with the same lowest “performance” on a particular trading day, we will,
in our sole and absolute discretion acting in good faith and in a commercially reasonable manner, decide which one
is the worst performing asset for that trading day.
C.
Payment of Potential Cash Dividend Amount(s)
●
The relevant term sheet will specify whether the potential cash dividend amount for a calculation period is:
●
(i)
a variable amount calculated according to the variable accrual formula (see “Variable Potential Cash Dividend
Amount” below); or
(ii)
a fixed amount (see “Fixed Potential Cash Dividend Amount” below).
You should note that it is possible that you may not receive any potential cash dividend amount for the entire
scheduled tenor of the Basket DCDC ELIs.
— 46 —
C-2(i)
●
Variable Potential Cash Dividend Amount
If the potential cash dividend amount for a calculation period is specified in the term sheet to be a variable amount,
we will determine whether such variable potential cash dividend amount is payable by reference to the price
performance of the worst performing asset in the basket on each trading day. The variable potential cash dividend
amount will be calculated according to the following variable accrual formula:
x
Days in
Total days
(II) Nominal amount x Day-out cash dividend rate x
Days out
Total days
(I) Nominal amount x
Day-in cash dividend rate
PLUS
‘Days in’ means the total number of trading days in a calculation period on which the closing price of the worst
performing asset (determined by us on each trading day based on the closing price of each reference asset in the
basket on such day) is at or above its floor price.
‘Days out’ means the total number of trading days in a calculation period on which the closing price of the worst
performing asset (determined by us on each trading day based on the closing price of each reference asset in the
basket on such day) is below its floor price.
‘Total days’ mean the total number of trading days in a calculation period.
The floor price of each reference asset is set at a specified percentage of its initial spot price and will be set out in
the relevant term sheet. The specified percentage used to calculate the floor price of each reference asset for each
relevant trading day during all of the calculation periods will be the same.
The day-in cash dividend rate and the day-out cash dividend rate will be specified in the relevant term sheet. The
day-out cash dividend rate can be set at zero.
●
Fixed Potential Cash Dividend Amount
If the potential cash dividend amount for a calculation period is specified in the term sheet to be a fixed amount,
such fixed potential cash dividend amount is payable regardless of the price performance of the reference assets in
the basket. The fixed potential cash dividend amount will be calculated according to the following formula:
Nominal amount x Fixed cash dividend rate
D.
Periodic Autocall Condition
●
The periodic autocall condition is satisfied if the closing price of the worst performing asset is at or above its call
price on a call date, which is set as certain calculation period end dates (excluding the expiry date) as set out in the
relevant term sheet.
●
The call price of each reference asset is set at a specified percentage of its initial spot price and will be set out in
the relevant term sheet. The specified percentage used to calculate the call price of each reference asset on each call
date will be the same. The call price may be set at a level which is higher than, equal to or lower than the exercise
price.
●
If the periodic autocall condition is satisfied on a call date, we will terminate the Basket DCDC ELIs on that call
date (regardless of whether a daily knock-in event has occurred). You will receive on the early settlement date (being
the 3rd business day after that call date) the nominal amount of the Basket DCDC ELIs and any accrued potential
cash dividend amount calculated up to (and including) that call date (less any cash settlement expenses).
— 47 —
E.
At Expiry
●
If the periodic autocall condition is not satisfied on any of the relevant call dates and the Basket DCDC ELIs have
not otherwise been early terminated, we will determine the final settlement payout under the Basket DCDC ELIs
on the expiry date. For this variation of Basket DCDC ELIs, the final settlement payout will depend on:
C-2(i)
(i)
the amount of any accrued potential cash dividend amount payable for the final calculation period (see also
“C. Payment of Potential Cash Dividend Amount(s)” above);
(ii)
whether a daily knock-in event has occurred. A daily knock-in event occurs if the closing price of the worst
performing asset is at or below its knock-in price on any knock-in event date, which is set as each trading
day during a relevant period as set out in the relevant term sheet. The knock-in price of each reference asset
is set at a specified percentage of its initial spot price and will be set out in the relevant term sheet. The
specified percentage used to calculate the knock-in price of each reference asset for each knock-in event date
will be the same. The knock-in price will always be set at a level which is lower than the exercise price and
the call price. The reference asset which triggers a knock-in event on a knock-in event date may or may not
be the same reference asset which is the worst performing asset on the expiry date; and
(iii) the closing price of the worst performing asset on the expiry date compared to its exercise price AND its call
price.
●
The exercise price of each reference asset may be expressed as a specified percentage of its initial spot price or in
a range of percentages of its initial spot price (such range will be no wider than Ⳳ2.5%) in the relevant term sheet.
The specified percentage (or if applicable, range of percentages) used to calculate the exercise price of each
reference asset will be the same.
●
If (i) a daily knock-in event has not occurred; or (ii) a daily knock-in event has occurred but the closing price of
the worst performing asset on the expiry date is at or above EITHER its exercise price OR its call price, we will
pay you on the settlement date (being the 3rd business day after the expiry date) a cash amount equal to the nominal
amount of the Basket DCDC ELIs and any accrued potential cash dividend amount for the final calculation period
(less any cash settlement expenses).
●
If a daily knock-in event has occurred and the closing price of the worst performing asset on the expiry date is
below BOTH its exercise price AND its call price, the conditional put option will be exercised by us at expiry of
the Basket DCDC ELIs and you will receive on the settlement date (being the 3rd business day after the expiry date)
either:
(i)
if you have elected for physical settlement — physical delivery of a number of the worst performing asset on
the expiry date (being the physical settlement amount) after payment of all physical settlement expenses
(please refer to page 115 for details of how the physical settlement amount is calculated) and a cash payment
for any fractional shares or units of the worst performing asset on the expiry date (please refer to page 116 for
details of how this amount is calculated); or
(ii)
if you have elected for cash settlement — payment of an amount equal to the cash equivalent of the physical
settlement amount (less any cash settlement expenses) (please refer to page 116 for details of how the cash
equivalent of the physical settlement amount is calculated).
You will also receive on the settlement date any accrued potential cash dividend amount for the final calculation
period.
You should note that where the conditional put option is exercised by us, you will be obliged to buy the worst
performing asset on the expiry date from us at its exercise price. In this case, you will suffer a loss if the
market value of the physical settlement amount (together with any fractional shares or units of the worst
performing asset on the expiry date) (in both cases calculated based on the closing price of the worst
performing asset on the expiry date) or the cash equivalent of the physical settlement amount, together with
any potential cash dividend amount(s) paid during the scheduled tenor of the Basket DCDC ELIs, is less than
the original amount invested. In an extreme case, you will not receive any potential cash dividend amount for
the entire scheduled tenor and the physical settlement amount or its cash equivalent could be worth nothing
and you could lose all of your investment.
— 48 —
You should also note that, if you elect for physical settlement, the physical settlement amount will only be
delivered to you on the settlement date. Therefore, you will be exposed to any movement in the market price
of the worst performing asset on the expiry date during the period between the expiry date and the settlement
date. If you choose not to sell such worst performing asset on the settlement date, you will be exposed to the
market risk of holding such worst performing asset.
●
You should note that your payout under the Basket DCDC ELIs will be reduced by any distributor’s charges and any
cash settlement expenses or physical settlement expenses payable by you at expiry of the Basket DCDC ELIs.
Worst Case Scenario
The hypothetical example below does not reflect a complete analysis of all possible gain or loss scenarios. You must
not rely on it as an indication of the price performance of the reference assets in the basket or the payout on the Basket
DCDC ELIs.
The example below illustrates the worst case scenario where the worst performing asset in the basket of two reference
assets performs poorly during the investment period of the Basket DCDC ELIs.
Performance of reference assets (%)
C-19
A daily knock-in event occurred
125
Call Price (% of initial spot price)
100
Exercise Price; Floor Price (% of initial spot price)
75
Knock-in Price (% of initial spot price)
50
25
Investment period
0
Trade Date
1st Calculation Period
End Date/1st Call Date
2nd Calculation Period
End Date/2nd Call Date
3rd Calculation Period
End Date/3rd Call Date
4th Calculation Period
End Date/Expiry Date
Knock-in Event Dates (each trading day from (but excluding)
the trade date to (and including) the expiry date)
Performance of reference asset 1 (% of initial spot price)
Performance of reference asset 2 (% of initial spot price)
According to the above diagram, reference asset 2 is the worst performing asset in the basket throughout the investment
period (i.e. the period from and including the trade date to and including the expiry date) of the Basket DCDC ELIs.
The above example illustrates the following:
(i)
Potential Cash Dividend Payout
The potential cash dividend amount is (a) fixed for the 1st calculation period and (b) variable for each of the 2nd to the
4th calculation periods. You will receive the fixed potential cash dividend amount for the 1st calculation period regardless
of the price performance of the reference assets in the basket. Since the worst performing asset (i.e. reference asset 2)
closes below its floor price on each of the trading days from the 2nd to the 4th calculation periods, you will receive the
variable potential cash dividend amount (calculated by reference to the day-out cash dividend rate) for each of the 2nd
to the 4th calculation periods.
— 49 —
(ii)
Periodic Autocall Condition Not Satisfied
The call dates are set as each of the calculation period end dates (excluding the expiry date). Since the worst performing
asset (i.e. reference asset 2) closes below its call price on each call date, the periodic autocall condition is not satisfied
and the Basket DCDC ELIs will not be early terminated.
(iii) Daily Knock-in Event Occurred
The knock-in event dates are set as each trading day during the period from (but excluding) the trade date to (and
including) the expiry date. Since the worst performing asset (i.e. reference asset 2) closes at or below its knock-in price
on certain knock-in event dates, hence a daily knock-in event has occurred. Since the worst performing asset also closes
below its exercise price and its call price on the expiry date, you will receive on the settlement date either physical
delivery of the physical settlement amount (together with a cash payment for any fractional shares or units of the worst
performing asset) or payment of the cash equivalent of the physical settlement amount. In this case, you will suffer a loss
if the market value of the physical settlement amount (together with any fractional shares or units of the worst performing
asset) (in both cases calculated based on the closing price of the worst performing asset on the expiry date) or the cash
equivalent of the physical settlement amount, together with any potential cash dividend amount(s) paid during the
scheduled tenor of the Basket DCDC ELIs is less than the original amount invested.
You should note that the above example assumes that the potential cash dividend amount is fixed for the 1st
calculation period, in which case you will receive such fixed potential cash dividend amount regardless of the price
performance of the reference assets in the basket. However, if the potential cash dividend amount is variable for
all of the calculation periods during the investment period of the Basket DCDC ELIs, it is possible that you may
not receive any potential cash dividend amount for the entire scheduled tenor. In an extreme case, you will not
receive any potential cash dividend amount for the entire scheduled tenor and the physical settlement amount or
its cash equivalent could be worth nothing and you could lose all of your investment.
Mode of Settlement at Expiry
When you place your purchase order for the Basket DCDC ELIs, you will need to specify whether you elect for cash
settlement or physical settlement upon expiry of your Basket DCDC ELIs in the case where a daily knock-in event has
occurred and the closing price of the worst performing asset on the expiry date is below its exercise price and its call price.
You can change your election at any time no later than 4:00 p.m. on the 3rd Hong Kong business day before the expiry
date. Please ask your distributor for details.
Adjustment to the terms and conditions and early termination of our Basket DCDC ELIs
Upon the occurrence of certain adjustment events (such as a potential adjustment event, a merger event or a tender offer)
affecting a reference asset in the basket, we can adjust some of the terms of our Basket DCDC ELIs (including adjusting
the exercise price, the call price, the floor price and the knock-in price of the affected reference asset) to account for that
event so as to preserve the economic equivalence of the Basket DCDC ELIs. If we determine that any adjustment to the
terms of the Basket DCDC ELIs is not appropriate to account for the relevant merger event or tender offer and to preserve
the economic equivalence of the Basket DCDC ELIs, we will seek to substitute the affected reference asset with another
reference asset in accordance with the terms and conditions of our Basket DCDC ELIs and make any further adjustments
to the terms of the Basket DCDC ELIs as we think fit (acting in good faith and in a commercially reasonable manner)
to account for the relevant merger event or tender offer. If we determine that substitution is not appropriate, we will early
terminate our Basket DCDC ELIs in accordance with the terms and conditions of our Basket DCDC ELIs.
Upon the occurrence of certain termination events (such as an insolvency or a delisting) affecting a reference asset in the
basket, we will seek to substitute the affected reference asset with another reference asset in accordance with the terms
and conditions of our Basket DCDC ELIs and make any further adjustments to the terms of the Basket DCDC ELIs as
we think fit (acting in good faith and in a commercially reasonable manner) to account for the relevant termination event.
If we determine that substitution is not appropriate, we will early terminate our Basket DCDC ELIs in accordance with
the terms and conditions of our Basket DCDC ELIs.
— 50 —
Upon the occurrence of certain market disruption events, we can postpone some of the key dates relevant to the terms of
our Basket DCDC ELIs. Any adjustments or substitution or early termination will be determined by us in our sole and
absolute discretion acting in good faith and in a commercially reasonable manner. Please refer to the summary table on
pages 93 to 99 of this product booklet for further details.
What charges do I have to pay?
Cash Settlement Expenses — If a settlement amount in cash is payable, you will have to pay for any expenses incurred
by us in connection with making the payment of the settlement amount in cash to you, including, for example, any taxes
and duties arising from the expiry of the Basket DCDC ELIs. Currently there are no such expenses. If such expenses are
payable in the future, we will notify the distributor(s) who will in turn inform you in advance.
Physical Settlement Expenses — Before the physical settlement amount is delivered to you on the settlement date, you
will have to pay for all out-of-pocket expenses relating to the transfer and receipt of the physical settlement amount,
including buyer’s stamp duty, transaction levies, registration charges and any other charges levied by your distributor (see
also “Distributor’s charges” below).
Distributor’s charges — Your distributor may charge you fees (including any charges for opening and maintaining a
securities account or an investment account with the distributor and any handling fee in relation to the Basket DCDC
ELIs). Please contact your distributor for details.
Cash settlement expenses, physical settlement expenses and distributor’s charges will affect the potential gain or
loss you get on your investment.
How can I buy the Basket DCDC ELIs?
If you would like to buy our Basket DCDC ELIs, you will have to place your Basket DCDC ELI purchase order with your
distributor. You can contact the appointed distributor(s) to enquire about the Basket DCDC ELIs on offer and the
application procedures. Your distributor will inform you of the purchase consideration (being the issue price) and any
applicable charges.
Once you place your Basket DCDC ELI purchase order with your distributor on the order date, you are committed to
purchase the Basket DCDC ELIs unless the post-sale cooling-off period is applicable (see section below on “Is there a
post-sale cooling-off period for our Basket DCDC ELIs?”) or you have cancelled your order within the specified period
of time as notified by your distributor following the publication of an updated programme memorandum and/or an
addendum to the programme memorandum and/or this product booklet during the offer period after you have placed your
order.
Your purchase order will be executed by us on the trade date and your distributor will pay the purchase consideration
(being the issue price) to us on your behalf on the issue date (being 6 to 10 business days after the trade date). Please
contact your distributor for details on how and when you have to pay the issue price to your distributor. A contract note
prepared by your distributor containing all the finalised commercial terms will be sent to you by your distributor within
2 Hong Kong business days after the trade date.
Is there a post-sale cooling-off period for our Basket DCDC ELIs?
Basket DCDC ELIs with an investment period of more than one year
If you have purchased a Basket DCDC ELI with an investment period (i.e. the period from (and including) the trade date
to (and including) the expiry date) of more than one year, you can choose to cancel or unwind the whole (and not part
of) your Basket DCDC ELI purchase order during the period from (and including) the date you place your purchase order
to (and including) the 5th Hong Kong business day after that date (this period is referred to as the “post-sale cooling-off
period”) by submitting your instructions to your distributor between 10:00 a.m. and 12:00 noon on any Hong Kong
business day during the post-sale cooling-off period.
— 51 —
C-2(o)
If you submit your instructions to cancel your Basket DCDC ELI purchase order to your distributor before your Basket
DCDC ELI purchase order has been executed on the trade date, your distributor will not pay the issue price to us on your
behalf on the issue date. If you submit your instructions to unwind your Basket DCDC ELI purchase order to your
distributor after your Basket DCDC ELI purchase order has been executed on the trade date, your distributor will pay the
issue price to us on your behalf on the issue date and we will pay your distributor a cash amount equal to the issue price
less any market value adjustments on the later of: (i) the 3rd business day after the day you submit your instructions to
unwind your Basket DCDC ELI purchase order; or (ii) the issue date.
In both cases, your distributor may charge you a handling fee when you cancel or unwind your Basket DCDC ELI
purchase order and (if applicable) such handling fee will be deducted from the cash amount returned to you. Please check
with your distributor for further details of when you will receive such cash amount from your distributor. The cash
amount returned to you may be substantially less than the original amount invested. In either case, the distributor’s
commission (if any) will not be deducted from the issue price or cash amount returned to you.
Basket DCDC ELIs with an investment period of one year or less
Please note that your right to cancel or unwind your Basket DCDC ELI purchase order during the post-sale cooling-off
period DOES NOT apply to Basket DCDC ELIs with an investment period of one year or less.
Is there any market making arrangement for your Basket DCDC ELIs before expiry?
Our Basket DCDC ELIs are not listed on any stock exchange. We (as market agent) will provide limited market making
arrangements for all our Basket DCDC ELIs (regardless of the length of the investment period and the scheduled tenor)
on each market making day falling every other Tuesday after the issue date up to the 3rd Hong Kong business day before
the expiry date. On each market making day, we (as market agent) will provide (via the distributor(s)): (i) indicative bid
prices (on a per-Basket DCDC ELI basis) during normal business hours; and (ii) a firm bid price (on a per-Basket DCDC
ELI basis) upon your request, provided that such request is submitted to your distributor between the opening of the
morning session of the Hong Kong Stock Exchange and the close of the morning session of the Hong Kong Stock
Exchange on such market making day. You may choose to sell part of or the entire holding of your Basket DCDC ELIs
provided that the minimum sell back order is equal to one Basket DCDC ELI and the total amount of Basket DCDC ELIs
you wish to sell is an integral number.
The indicative bid prices will be determined by us taking into account certain factors as set out on page 125 of this product
booklet. The indicative bid prices are provided for your reference only as they will be subject to intra-day change and may
not be the same as the firm bid price at which we are willing to buy back your Basket DCDC ELIs. Upon your request
for a firm bid price, we (as market agent) will determine such firm bid price based on the indicative bid price and the
prevailing market conditions at the time of your request. We will notify your distributor of such firm bid price and your
distributor will in turn inform you. You should note that the firm bid price provided to you by your distributor will
only be valid for a limited period of time as notified to you by your distributor. Upon acceptance of the firm bid price
by you within that specified period of time, we will buy back your Basket DCDC ELIs at that firm bid price on that market
making day. Your distributor may also charge you a handling fee when you sell your Basket DCDC ELIs back to us on
a market making day. You should note that the amount you receive from selling your Basket DCDC ELIs back to us
on a market making day will be reduced by any distributor’s fees or charges and may be substantially less than
the original amount invested.
If you choose to sell your Basket DCDC ELIs back to us on a market making day, we will deliver the sale proceeds of
your Basket DCDC ELIs to your distributor on the 3rd business day after that market making day. Please check with your
distributor for further details.
Please also note that indicative bid prices and/or firm bid prices and/or market making activities may not be
available on a market making day if certain events or technical problems occur (in which case the affected market
making day will be postponed to the next Hong Kong business day on which the Hong Kong Stock Exchange is open
for trading which is not affected by any of these events or problems).
— 52 —
C-39
How can I find out the indicative bid price of my Basket DCDC ELIs?
C-39
We (as market agent) will make available (via the distributor(s)) indicative bid prices for all our Basket DCDC ELIs on
each market making day. We will not upload such information onto our website and you will need to contact your
distributor for further details on the most effective way to access the indicative bid prices.
Additional Information
A.
Basket DCDC ELI offering documents
The following Basket DCDC ELI offering documents contain detailed information about HSBC, the Programme
and the Basket DCDC ELIs. You should read all of these documents before deciding whether to invest in our Basket
DCDC ELIs:
(i)
the relevant indicative term sheet for the series of the Basket DCDC ELIs you would like to buy;
(ii)
the Programme Memorandum dated 22 July 2011 together with any addendum as stated in the relevant term sheet;
and
(iii) this Product Booklet together with any addendum as stated in the relevant term sheet.
The distributor(s) has an obligation to distribute to you ALL of the above documents in English or
Chinese as you may prefer.
B.
Ongoing disclosure by HSBC
C-38
HSBC will keep the SFC and the distributor(s) informed as soon as reasonably practicable if (i) HSBC (as issuer) ceases
to meet any core requirements in Appendix A to the Code; (ii) HSBC (as product arranger) ceases to meet any eligibility
requirements in 4.2 of the Code; and (iii) to the extent permitted by any applicable law, changes in our financial condition
or other circumstances which could reasonably be expected to have a material adverse effect on our ability (as issuer) to
fulfil our commitment in connection with our Basket DCDC ELIs. Your distributor will in turn inform you. Please contact
your distributor for further details.
If you would like to enquire about our Basket DCDC ELIs, visit any designated branches of the appointed distributor(s)
for the Basket DCDC ELIs.
— 53 —
Key Facts Statement (F)
C-6
Non-Principal Protected Unlisted Daily Cash Dividend Callable Equity Linked
Investments Linked to a Basket of Securities (Basket DCDC ELIs) with Periodic
Autocall Condition and At-Expiry Knock-in Feature
issued by
The Hongkong and Shanghai Banking Corporation Limited (HSBC)
We may issue six variations of Basket DCDC ELIs. This key facts statement only provides you with the key
information about one variation of Basket DCDC ELIs that we may issue: Basket DCDC ELIs with periodic autocall
condition and at-expiry knock-in.
This key facts statement does not contain all the information that may be important to you as an investor in our
Basket DCDC ELIs and your investment decision should not be made solely on the basis of the information
contained in this key facts statement. You should read the remaining sections of this product booklet (in particular,
the section headed “Risk Warnings”) and the other Basket DCDC ELI offering documents before deciding whether
to invest in our Basket DCDC ELIs.
If you are in any doubt about any of the contents of the Basket DCDC ELI offering documents, you should obtain
independent professional advice.
IMPORTANT RISK WARNINGS
●
Structured Investment Product
Our Basket DCDC ELIs are NOT equivalent to time deposits. They are structured investment products which are
embedded with derivatives.
●
Not Principal Protected
Our Basket DCDC ELIs are not principal protected: you could lose all of your investment.
●
Limited Maximum Potential Gain; you may not receive any potential cash dividend amount
The maximum potential gain under this product is capped at the maximum periodic potential cash dividend
amount(s) payable during the scheduled tenor (i.e. the period from (and including) the issue date to (and
including) the settlement date) of the Basket DCDC ELIs (less any cash settlement expenses). It is possible that
you may not receive any potential cash dividend amount for the entire scheduled tenor of the Basket DCDC ELIs.
●
Potential Payout determined by the Worst Performing Asset
The potential payout under our Basket DCDC ELIs is linked to the performance of the worst performing asset
in the basket (determined by us on each trading day based on the closing price of each reference asset in the
basket on such day). The worst performing asset on each trading day can be different. It will not matter how well
the other reference assets in the basket perform: the potential payout on our Basket DCDC ELIs is always
determined by the asset which performs worst out of all the reference assets in the basket.
●
No Collateral
Our Basket DCDC ELIs are not secured on any of our assets or any collateral.
●
Limited Market Making Arrangements
Our Basket DCDC ELIs are designed to be held to their expiry date. We (as market agent) will provide limited
market making arrangements on a bi-weekly basis for all our Basket DCDC ELIs. If you try to sell your Basket
DCDC ELIs before expiry, you may receive an amount which is substantially less than the original amount
invested.
●
Not the same as Investing in the Reference Assets
Investing in our Basket DCDC ELIs is not the same as investing in the reference assets. Changes in the market
price of the reference assets may not lead to a corresponding change in the market value of, or your potential
payout under, the Basket DCDC ELIs.
— 54 —
C-34(c)
●
Re-investment Risk
Our Basket DCDC ELIs contain an autocall condition. If the autocall condition is satisfied, the Basket DCDC ELIs
will be terminated before expiry and no further potential cash dividend amount will be payable following
termination. You may not be able to enjoy the same rate of return if you re-invest in other investments with similar
risk parameters.
●
Not Covered by Investor Compensation Fund
Our Basket DCDC ELIs are not listed on any stock exchange and are not covered by the Investor Compensation
Fund.
●
Maximum Loss upon HSBC’s Default or Insolvency
Our Basket DCDC ELIs constitute general, unsecured and unsubordinated contractual obligations of HSBC as
issuer, and of no other person (including the ultimate holding company of our group, HSBC Holdings plc). When
you buy our Basket DCDC ELIs, you will be relying on HSBC’s creditworthiness. If HSBC becomes insolvent or
defaults on its obligations under the Basket DCDC ELIs, in the worst case scenario, you could lose all of your
investment.
●
English version of the terms and conditions prevails over Chinese version
For the purpose of lodgement with the relevant clearing system(s), the global certificate representing a series of
Basket DCDC ELIs and the terms and conditions of the Basket DCDC ELIs are issued in the English language only.
If there is any inconsistency between the Chinese version of the terms and conditions of our Basket DCDC ELIs and
the English version, the English version will prevail over the Chinese version. If you do not understand the English
version, you should obtain independent professional advice.
●
Exposure to risk from trade date
You should note that as all the commercial variables of our Basket DCDC ELIs are determined on the trade date,
you will be subject to the terms and conditions of our Basket DCDC ELIs from the trade date and you will be
exposed to the market risk and the price movement of the reference assets from the trade date which may affect the
market value of the Basket DCDC ELIs.
●
Conflicts of Interest
You should note that potential and actual conflicts of interest may arise from the different roles played by us and
our subsidiaries and affiliates in connection with our Basket DCDC ELIs.
●
You do not have direct contractual rights to enforce our Basket DCDC ELIs
You do not have direct contractual rights against us as the issuer to enforce our Basket DCDC ELIs. To assert your
rights as an investor in our Basket DCDC ELIs, you will have to rely on your distributor (directly or indirectly via
its custodian) to take action on your behalf. If your distributor fails to take action in accordance with your
instructions or if your distributor’s custodian fails to take action in accordance with the instructions of your
distributor, or your distributor or its custodian becomes insolvent or defaults on its obligations, you will need to take
action against your distributor in accordance with the terms of arrangement between you and your distributor.
C-34(d)
Commissions:
We may pay a commission to the distributor(s). Distributor(s)’ commissions and other transaction costs including our cost
of hedging are factored into the original issue price of the Basket DCDC ELIs.
What are Basket DCDC ELIs with Periodic Autocall Condition and At-Expiry Knock-in?
A.
Overview
●
Basket DCDC ELIs are structured investment products which contain an embedded conditional put option over the
reference assets in the basket. If you purchase a Basket DCDC ELI, you will be selling a conditional put option
over the reference assets in the basket to us. If certain conditions are met, you will be obliged to buy the worst
performing asset on the expiry date from us at its exercise price (as further described in the sub-section headed “E.
At Expiry” below).
●
Payout under the Basket DCDC ELIs is linked to the price performance of the worst performing asset in the basket.
The basket of reference assets may comprise a minimum of two and a maximum of six shares in companies and/or
units of funds listed on the Hong Kong Stock Exchange and quoted in Hong Kong dollars. Not all Hong Kong-listed
shares or funds can be used as a reference asset, you should check with your distributor what kind of reference assets
are available.
— 55 —
C-2(b)
(c)(d)
(f)
●
Our Basket DCDC ELIs will be denominated and settled in Hong Kong dollars, United States dollars or other
non-restricted and freely convertible currencies as specified in the relevant term sheet. If the settlement currency of
the Basket DCDC ELIs is different from Hong Kong dollars (being the currency in which the reference assets trade),
we will convert one currency into another at the exchange rate as specified in the relevant term sheet in making
calculations under the Basket DCDC ELIs (if applicable).
●
You can buy a Basket DCDC ELI at its issue price, which is equal to the nominal amount of the Basket DCDC ELI.
The nominal amount of a Basket DCDC ELI is equivalent to the face amount of the Basket DCDC ELI and will be
specified in the relevant term sheet. The minimum investment amount is HKD100,000 (or its equivalent in foreign
currency).
●
The key features of our Basket DCDC ELIs with periodic autocall condition and at-expiry knock-in are set out
below:
Basket DCDC ELIs with:
A. Potential Cash Dividend Amount
Periodic Autocall Condition and At-Expiry Knock-in
May receive potential periodic cash dividend amount
if certain conditions are met
Periodic autocall condition applies
At-expiry knock-in event applies
B. Autocall Condition
C. Knock-in Event
●
You should note that while you place your Basket DCDC ELI purchase order(s) during the offer period, all of the
commercial variables in relation to the reference assets (including the initial spot prices, the exercise prices, the call
prices, the floor prices and knock-in prices of the reference assets) that are used to determine the payout of your
Basket DCDC ELI will only be recorded and determined on the trade date after you have purchased the Basket
DCDC ELI. The initial spot price of a reference asset is either (i) the closing price of that reference asset on the trade
date or (ii) the prevailing market price of that reference asset as quoted by the Hong Kong Stock Exchange at the
time your Basket DCDC ELI purchase order is executed on the trade date. A contract note prepared by your
distributor containing all the finalised commercial terms that apply to your Basket DCDC ELIs will be sent to you
by your distributor within 2 Hong Kong business days after the trade date.
B.
How to determine the worst performing asset?
●
The price performance of the worst performing asset in the basket will determine (i) whether the periodic autocall
condition has been met; and (ii) the total payout under our Basket DCDC ELIs.
The reference asset in the basket with the lowest “performance” on a particular trading day will be the worst
performing asset for that trading day. The worst performing asset on each trading day can be different. We will use
the following formula to determine the “performance” for each reference asset on a trading day:
Performance =
Closing price of the reference asset on a trading day
Initial spot price of the reference asset
x 100%
If there is more than one reference asset with the same lowest “performance” on a particular trading day, we will,
in our sole and absolute discretion acting in good faith and in a commercially reasonable manner, decide which one
is the worst performing asset for that trading day.
C.
Payment of Potential Cash Dividend Amount(s)
●
The relevant term sheet will specify whether the potential cash dividend amount for a calculation period is:
●
(i)
a variable amount calculated according to the variable accrual formula (see “Variable Potential Cash Dividend
Amount” below); or
(ii)
a fixed amount (see “Fixed Potential Cash Dividend Amount” below).
You should note that it is possible that you may not receive any potential cash dividend amount for the entire
scheduled tenor of the Basket DCDC ELIs.
— 56 —
C-2(i)
●
Variable Potential Cash Dividend Amount
If the potential cash dividend amount for a calculation period is specified in the term sheet to be a variable amount,
we will determine whether such variable potential cash dividend amount is payable by reference to the price
performance of the worst performing asset in the basket on each trading day. The variable potential cash dividend
amount will be calculated according to the following variable accrual formula:
x
Days in
Total days
(II) Nominal amount x Day-out cash dividend rate x
Days out
Total days
(I) Nominal amount x
Day-in cash dividend rate
PLUS
‘Days in’ means the total number of trading days in a calculation period on which the closing price of the worst
performing asset (determined by us on each trading day based on the closing price of each reference asset in the
basket on such day) is at or above its floor price.
‘Days out’ means the total number of trading days in a calculation period on which the closing price of the worst
performing asset (determined by us on each trading day based on the closing price of each reference asset in the
basket on such day) is below its floor price.
‘Total days’ mean the total number of trading days in a calculation period.
The floor price of each reference asset is set at a specified percentage of its initial spot price and will be set out in
the relevant term sheet. The specified percentage used to calculate the floor price of each reference asset for each
relevant trading day during all of the calculation periods will be the same.
The day-in cash dividend rate and the day-out cash dividend rate will be specified in the relevant term sheet. The
day-out cash dividend rate can be set at zero.
●
Fixed Potential Cash Dividend Amount
If the potential cash dividend amount for a calculation period is specified in the term sheet to be a fixed amount,
such fixed potential cash dividend amount is payable regardless of the price performance of the reference assets in
the basket. The fixed potential cash dividend amount will be calculated according to the following formula:
Nominal amount x Fixed cash dividend rate
D.
Periodic Autocall Condition
●
The periodic autocall condition is satisfied if the closing price of the worst performing asset is at or above its call
price on a call date, which is set as certain calculation period end dates (excluding the expiry date) as set out in the
relevant term sheet.
●
The call price of each reference asset is set at a specified percentage of its initial spot price and will be set out in
the relevant term sheet. The specified percentage used to calculate the call price of each reference asset on each call
date will be the same. The call price may be set at a level which is higher than, equal to or lower than the exercise
price.
●
If the periodic autocall condition is satisfied on a call date, we will terminate the Basket DCDC ELIs on that call
date. You will receive on the early settlement date (being the 3rd business day after that call date) the nominal
amount of the Basket DCDC ELIs and any accrued potential cash dividend amount calculated up to (and including)
that call date (less any cash settlement expenses).
— 57 —
E.
At Expiry
●
If the periodic autocall condition is not satisfied on any of the relevant call dates and the Basket DCDC ELIs have
not otherwise been early terminated, we will determine the final settlement payout under the Basket DCDC ELIs
on the expiry date. For this variation of Basket DCDC ELIs, the final settlement payout will depend on:
C-2(i)
(i)
the amount of any accrued potential cash dividend amount payable for the final calculation period (see also
“C. Payment of Potential Cash Dividend Amount(s)” above); and
(ii)
whether an at-expiry knock-in event has occurred. An at-expiry knock-in event occurs if the closing price of
the worst performing asset is at or below its knock-in price on the knock-in event date, which is set as the
expiry date. The knock-in price of each reference asset is set at a specified percentage of its initial spot price
and will be set out in the relevant term sheet. The specified percentage used to calculate the knock-in price
of each reference asset on the knock-in event date will be the same. The knock-in price will always be set at
a level which is lower than the exercise price and the call price.
●
The exercise price of each reference asset may be expressed as a specified percentage of its initial spot price or in
a range of percentages of its initial spot price (such range will be no wider than Ⳳ2.5%) in the relevant term sheet.
The specified percentage (or if applicable, range of percentages) used to calculate the exercise price of each
reference asset will be the same.
●
If an at-expiry knock-in event has not occurred, we will pay you on the settlement date (being the 3rd business day
after the expiry date) a cash amount equal to the nominal amount of the Basket DCDC ELIs and any accrued
potential cash dividend amount for the final calculation period (less any cash settlement expenses).
●
If an at-expiry knock-in event has occurred, the conditional put option will be exercised by us at expiry of the
Basket DCDC ELIs and you will receive on the settlement date (being the 3rd business day after the expiry date)
either:
(i)
if you have elected for physical settlement — physical delivery of a number of the worst performing asset on
the expiry date (being the physical settlement amount) after payment of all physical settlement expenses
(please refer to page 115 for details of how the physical settlement amount is calculated) and a cash payment
for any fractional shares or units of the worst performing asset on the expiry date (please refer to page 116 for
details of how this amount is calculated); or
(ii)
if you have elected for cash settlement — payment of an amount equal to the cash equivalent of the physical
settlement amount (less any cash settlement expenses) (please refer to page 116 for details of how the cash
equivalent of the physical settlement amount is calculated).
You will also receive on the settlement date any accrued potential cash dividend amount for the final calculation
period.
You should note that where the conditional put option is exercised by us, you will be obliged to buy the worst
performing asset on the expiry date from us at its exercise price. In this case, you will suffer a loss if the
market value of the physical settlement amount (together with any fractional shares or units of the worst
performing asset on the expiry date) (in both cases calculated based on the closing price of the worst
performing asset on the expiry date) or the cash equivalent of the physical settlement amount, together with
any potential cash dividend amount(s) paid during the scheduled tenor of the Basket DCDC ELIs, is less than
the original amount invested. In an extreme case, you will not receive any potential cash dividend amount for
the entire scheduled tenor and the physical settlement amount or its cash equivalent could be worth nothing
and you could lose all of your investment.
You should also note that, if you elect for physical settlement, the physical settlement amount will only be
delivered to you on the settlement date. Therefore, you will be exposed to any movement in the market price
of the worst performing asset on the expiry date during the period between the expiry date and the settlement
date. If you choose not to sell such worst performing asset on the settlement date, you will be exposed to the
market risk of holding such worst performing asset.
●
You should note that your payout under the Basket DCDC ELIs will be reduced by any distributor’s charges and any
cash settlement expenses or physical settlement expenses payable by you at expiry of the Basket DCDC ELIs.
— 58 —
Worst Case Scenario
The hypothetical example below does not reflect a complete analysis of all possible gain or loss scenarios. You must
not rely on it as an indication of the price performance of the reference assets in the basket or the payout on the Basket
DCDC ELIs.
The example below illustrates the worst case scenario where the worst performing asset in the basket of two reference
assets performs poorly during the investment period of the Basket DCDC ELIs.
Performance of reference assets (%)
C-19
An at-expiry knock-in event occurred
125
Call Price (% of initial spot price)
100
Exercise Price; Floor Price (% of initial spot price)
75
Knock-in Price (% of initial spot price)
50
25
Investment period
0
Trade Date
1st Calculation Period
End Date/1st Call Date
2nd Calculation Period
End Date/2nd Call Date
3rd Calculation Period
End Date/3rd Call Date
4th Calculation Period
End Date/Expiry Date/
Knock-in Event Date
Performance of reference asset 1 (% of initial spot price)
Performance of reference asset 2 (% of initial spot price)
According to the above diagram, reference asset 2 is the worst performing asset in the basket throughout the investment
period (i.e. the period from and including the trade date to and including the expiry date) of the Basket DCDC ELIs.
The above example illustrates the following:
(i)
Potential Cash Dividend Payout
The potential cash dividend amount is (a) fixed for the 1st calculation period and (b) variable for each of the 2nd to the
4th calculation periods. You will receive the fixed potential cash dividend amount for the 1st calculation period regardless
of the price performance of the reference assets in the basket. Since the worst performing asset (i.e. reference asset 2)
closes below its floor price on each of the trading days from the 2nd to the 4th calculation periods, you will receive the
variable potential cash dividend amount (calculated by reference to the day-out cash dividend rate) for each of the 2nd
to the 4th calculation periods.
(ii)
Periodic Autocall Condition Not Satisfied
The call dates are set as each of the calculation period end dates (excluding the expiry date). Since the worst performing
asset (i.e. reference asset 2) closes below its call price on each call date, the periodic autocall condition is not satisfied
and the Basket DCDC ELIs will not be early terminated.
(iii) At-expiry Knock-in Event Occurred
Since the worst performing asset (i.e. reference asset 2) closes below its knock-in price on the knock-in event date (i.e.
the expiry date), an at-expiry knock-in event has occurred. You will receive on the settlement date either physical delivery
of the physical settlement amount (together with a cash payment for any fractional shares or units of the worst performing
asset) or payment of the cash equivalent of the physical settlement amount. In this case, you will suffer a loss if the market
— 59 —
value of the physical settlement amount (together with any fractional shares or units of the worst performing asset) (in
both cases calculated based on the closing price of the worst performing asset on the expiry date) or the cash equivalent
of the physical settlement amount, together with any potential cash dividend amount(s) paid during the scheduled tenor
of the Basket DCDC ELIs is less than the original amount invested.
You should note that the above example assumes that the potential cash dividend amount is fixed for the 1st
calculation period, in which case you will receive such fixed potential cash dividend amount regardless of the price
performance of the reference assets in the basket. However, if the potential cash dividend amount is variable for
all of the calculation periods during the investment period of the Basket DCDC ELIs, it is possible that you may
not receive any potential cash dividend amount for the entire scheduled tenor. In an extreme case, you will not
receive any potential cash dividend amount for the entire scheduled tenor and the physical settlement amount or
its cash equivalent could be worth nothing and you could lose all of your investment.
Mode of Settlement at Expiry
When you place your purchase order for the Basket DCDC ELIs, you will need to specify whether you elect for cash
settlement or physical settlement upon expiry of your Basket DCDC ELIs in the case where an at-expiry knock-in event
has occurred. You can change your election at any time no later than 4:00 p.m. on the 3rd Hong Kong business day before
the expiry date. Please ask your distributor for details.
Adjustment to the terms and conditions and early termination of our Basket DCDC ELIs
Upon the occurrence of certain adjustment events (such as a potential adjustment event, a merger event or a tender offer)
affecting a reference asset in the basket, we can adjust some of the terms of our Basket DCDC ELIs (including adjusting
the exercise price, the call price, the floor price and the knock-in price of the affected reference asset) to account for that
event so as to preserve the economic equivalence of the Basket DCDC ELIs. If we determine that any adjustment to the
terms of the Basket DCDC ELIs is not appropriate to account for the relevant merger event or tender offer and to preserve
the economic equivalence of the Basket DCDC ELIs, we will seek to substitute the affected reference asset with another
reference asset in accordance with the terms and conditions of our Basket DCDC ELIs and make any further adjustments
to the terms of the Basket DCDC ELIs as we think fit (acting in good faith and in a commercially reasonable manner)
to account for the relevant merger event or tender offer. If we determine that substitution is not appropriate, we will early
terminate our Basket DCDC ELIs in accordance with the terms and conditions of our Basket DCDC ELIs.
Upon the occurrence of certain termination events (such as an insolvency or a delisting) affecting a reference asset in the
basket, we will seek to substitute the affected reference asset with another reference asset in accordance with the terms
and conditions of our Basket DCDC ELIs and make any further adjustments to the terms of the Basket DCDC ELIs as
we think fit (acting in good faith and in a commercially reasonable manner) to account for the relevant termination event.
If we determine that substitution is not appropriate, we will early terminate our Basket DCDC ELIs in accordance with
the terms and conditions of our Basket DCDC ELIs.
Upon the occurrence of certain market disruption events, we can postpone some of the key dates relevant to the terms of
our Basket DCDC ELIs. Any adjustments or substitution or early termination will be determined by us in our sole and
absolute discretion acting in good faith and in a commercially reasonable manner. Please refer to the summary table on
pages 93 to 99 of this product booklet for further details.
What charges do I have to pay?
Cash Settlement Expenses — If a settlement amount in cash is payable, you will have to pay for any expenses incurred
by us in connection with making the payment of the settlement amount in cash to you, including, for example, any taxes
and duties arising from the expiry of the Basket DCDC ELIs. Currently there are no such expenses. If such expenses are
payable in the future, we will notify the distributor(s) who will in turn inform you in advance.
Physical Settlement Expenses — Before the physical settlement amount is delivered to you on the settlement date, you
will have to pay for all out-of-pocket expenses relating to the transfer and receipt of the physical settlement amount,
including buyer’s stamp duty, transaction levies, registration charges and any other charges levied by your distributor (see
also “Distributor’s charges” below).
— 60 —
Distributor’s charges — Your distributor may charge you fees (including any charges for opening and maintaining a
securities account or an investment account with the distributor and any handling fee in relation to the Basket DCDC
ELIs). Please contact your distributor for details.
Cash settlement expenses, physical settlement expenses and distributor’s charges will affect the potential gain or
loss you get on your investment.
How can I buy the Basket DCDC ELIs?
If you would like to buy our Basket DCDC ELIs, you will have to place your Basket DCDC ELI purchase order with your
distributor. You can contact the appointed distributor(s) to enquire about the Basket DCDC ELIs on offer and the
application procedures. Your distributor will inform you of the purchase consideration (being the issue price) and any
applicable charges.
Once you place your Basket DCDC ELI purchase order with your distributor on the order date, you are committed to
purchase the Basket DCDC ELIs unless the post-sale cooling-off period is applicable (see section below on “Is there a
post-sale cooling-off period for our Basket DCDC ELIs?”) or you have cancelled your order within the specified period
of time as notified by your distributor following the publication of an updated programme memorandum and/or an
addendum to the programme memorandum and/or this product booklet during the offer period after you have placed your
order.
Your purchase order will be executed by us on the trade date and your distributor will pay the purchase consideration
(being the issue price) to us on your behalf on the issue date (being 6 to 10 business days after the trade date). Please
contact your distributor for details on how and when you have to pay the issue price to your distributor. A contract note
prepared by your distributor containing all the finalised commercial terms will be sent to you by your distributor within
2 Hong Kong business days after the trade date.
Is there a post-sale cooling-off period for our Basket DCDC ELIs?
Basket DCDC ELIs with an investment period of more than one year
If you have purchased a Basket DCDC ELI with an investment period (i.e. the period from (and including) the trade date
to (and including) the expiry date) of more than one year, you can choose to cancel or unwind the whole (and not part
of) your Basket DCDC ELI purchase order during the period from (and including) the date you place your purchase order
to (and including) the 5th Hong Kong business day after that date (this period is referred to as the “post-sale cooling-off
period”) by submitting your instructions to your distributor between 10:00 a.m. and 12:00 noon on any Hong Kong
business day during the post-sale cooling-off period.
If you submit your instructions to cancel your Basket DCDC ELI purchase order to your distributor before your Basket
DCDC ELI purchase order has been executed on the trade date, your distributor will not pay the issue price to us on your
behalf on the issue date. If you submit your instructions to unwind your Basket DCDC ELI purchase order to your
distributor after your Basket DCDC ELI purchase order has been executed on the trade date, your distributor will pay the
issue price to us on your behalf on the issue date and we will pay your distributor a cash amount equal to the issue price
less any market value adjustments on the later of: (i) the 3rd business day after the day you submit your instructions to
unwind your Basket DCDC ELI purchase order; or (ii) the issue date.
In both cases, your distributor may charge you a handling fee when you cancel or unwind your Basket DCDC ELI
purchase order and (if applicable) such handling fee will be deducted from the cash amount returned to you. Please check
with your distributor for further details of when you will receive such cash amount from your distributor. The cash
amount returned to you may be substantially less than the original amount invested. In either case, the distributor’s
commission (if any) will not be deducted from the issue price or cash amount returned to you.
— 61 —
C-2(o)
Basket DCDC ELIs with an investment period of one year or less
Please note that your right to cancel or unwind your Basket DCDC ELI purchase order during the post-sale cooling-off
period DOES NOT apply to Basket DCDC ELIs with an investment period of one year or less.
Is there any market making arrangement for your Basket DCDC ELIs before expiry?
C-39
Our Basket DCDC ELIs are not listed on any stock exchange. We (as market agent) will provide limited market making
arrangements for all our Basket DCDC ELIs (regardless of the length of the investment period and the scheduled tenor)
on each market making day falling every other Tuesday after the issue date up to the 3rd Hong Kong business day before
the expiry date. On each market making day, we (as market agent) will provide (via the distributor(s)): (i) indicative bid
prices (on a per-Basket DCDC ELI basis) during normal business hours; and (ii) a firm bid price (on a per-Basket DCDC
ELI basis) upon your request, provided that such request is submitted to your distributor between the opening of the
morning session of the Hong Kong Stock Exchange and the close of the morning session of the Hong Kong Stock
Exchange on such market making day. You may choose to sell part of or the entire holding of your Basket DCDC ELIs
provided that the minimum sell back order is equal to one Basket DCDC ELI and the total amount of Basket DCDC ELIs
you wish to sell is an integral number.
The indicative bid prices will be determined by us taking into account certain factors as set out on page 125 of this product
booklet. The indicative bid prices are provided for your reference only as they will be subject to intra-day change and may
not be the same as the firm bid price at which we are willing to buy back your Basket DCDC ELIs. Upon your request
for a firm bid price, we (as market agent) will determine such firm bid price based on the indicative bid price and the
prevailing market conditions at the time of your request. We will notify your distributor of such firm bid price and your
distributor will in turn inform you. You should note that the firm bid price provided to you by your distributor will
only be valid for a limited period of time as notified to you by your distributor. Upon acceptance of the firm bid price
by you within that specified period of time, we will buy back your Basket DCDC ELIs at that firm bid price on that market
making day. Your distributor may also charge you a handling fee when you sell your Basket DCDC ELIs back to us on
a market making day. You should note that the amount you receive from selling your Basket DCDC ELIs back to us
on a market making day will be reduced by any distributor’s fees or charges and may be substantially less than
the original amount invested.
If you choose to sell your Basket DCDC ELIs back to us on a market making day, we will deliver the sale proceeds of
your Basket DCDC ELIs to your distributor on the 3rd business day after that market making day. Please check with your
distributor for further details.
Please also note that indicative bid prices and/or firm bid prices and/or market making activities may not be
available on a market making day if certain events or technical problems occur (in which case the affected market
making day will be postponed to the next Hong Kong business day on which the Hong Kong Stock Exchange is open
for trading which is not affected by any of these events or problems).
How can I find out the indicative bid price of my Basket DCDC ELIs?
We (as market agent) will make available (via the distributor(s)) indicative bid prices for all our Basket DCDC ELIs on
each market making day. We will not upload such information onto our website and you will need to contact your
distributor for further details on the most effective way to access the indicative bid prices.
Additional Information
A.
Basket DCDC ELI offering documents
The following Basket DCDC ELI offering documents contain detailed information about HSBC, the Programme
and the Basket DCDC ELIs. You should read all of these documents before deciding whether to invest in our Basket
DCDC ELIs:
(i)
the relevant indicative term sheet for the series of the Basket DCDC ELIs you would like to buy;
— 62 —
C-39
(ii)
the Programme Memorandum dated 22 July 2011 together with any addendum as stated in the relevant term sheet;
and
(iii) this Product Booklet together with any addendum as stated in the relevant term sheet.
The distributor(s) has an obligation to distribute to you ALL of the above documents in English or
Chinese as you may prefer.
B.
Ongoing disclosure by HSBC
C-38
HSBC will keep the SFC and the distributor(s) informed as soon as reasonably practicable if (i) HSBC (as issuer) ceases
to meet any core requirements in Appendix A to the Code; (ii) HSBC (as product arranger) ceases to meet any eligibility
requirements in 4.2 of the Code; and (iii) to the extent permitted by any applicable law, changes in our financial condition
or other circumstances which could reasonably be expected to have a material adverse effect on our ability (as issuer) to
fulfil our commitment in connection with our Basket DCDC ELIs. Your distributor will in turn inform you. Please contact
your distributor for further details.
If you would like to enquire about our Basket DCDC ELIs, visit any designated branches of the appointed distributor(s)
for the Basket DCDC ELIs.
— 63 —
RISK WARNINGS
•
Our Basket DCDC ELIs are not principal protected: you could lose all of your investment
Our Basket DCDC ELIs are non-principal protected unlisted structured investment products embedded
with derivatives; you may sustain a total loss in your investment. Our Basket DCDC ELIs are not
equivalent to time deposits. If a variable potential cash dividend amount is payable for a calculation
period, the amount of any such variable potential cash dividend amount payable to you will depend on
the price performance of the worst performing asset in the basket in each trading day during the relevant
calculation period. Whether the autocall condition is satisfied and what you will get at expiry of the
Basket DCDC ELIs will also depend on the price performance of the worst performing asset on the
relevant trading day. In an extreme case, you will not receive any potential cash dividend amount
for the entire scheduled tenor and the physical settlement amount or its cash equivalent could be
worth nothing and you could lose all of your investment.
You should also note that, if you receive the physical settlement amount (in board lots and odd lots (as
the case may be) of the worst performing asset on the expiry date) on expiry of our Basket DCDC ELIs,
subsequent to the delivery of the physical settlement amount to you, you will be exposed to the market
risk of holding such worst performing asset if you choose not to sell such worst performing asset on
the settlement date. If an odd lot of such worst performing asset is delivered to you, the market price
of the odd lot may be lower than the whole board lot, and you may also experience difficulty in selling
such odd lot in the market.
•
Limited Maximum Potential Gain; you may not receive any potential cash dividend
amount
The maximum potential gain at expiry of our Basket DCDC ELIs is capped at the maximum periodic
potential cash dividend amount(s) paid during the scheduled tenor of the Basket DCDC ELIs (less any
cash settlement expenses). In the case where the autocall condition is satisfied on a call date, the
maximum potential gain is capped at the potential cash dividend amount accrued up to (and including)
that call date. It is possible that you may not receive any potential cash dividend amount for the entire
scheduled tenor of the Basket DCDC ELIs.
•
The potential payout under our Basket DCDC ELIs will be determined by the
performance of the worst performing asset in the basket
The potential payout under our Basket DCDC ELIs is linked to the performance of the reference asset
which performs the worst out of all the reference assets in the basket (determined by us on each trading
day based on the closing price of each reference asset in the basket on such day). The worst performing
asset on each trading day can be different. You could lose all of your investment due to the performance
of the worst performing asset, even if the other reference assets in the basket perform well.
•
Our Basket DCDC ELIs are designed to be held to their expiry date. There will be
limited market making arrangements for all our Basket DCDC ELIs
Our Basket DCDC ELIs are designed to be held to their expiry date. You should be prepared to invest
your funds for the full scheduled tenor of the Basket DCDC ELIs. There will, however, be limited
market making arrangements for all our Basket DCDC ELIs (regardless of the length of the investment
period and scheduled tenor of the Basket DCDC ELIs) provided by us (as market agent) on each market
making day on a bi-weekly basis. The indicative bid prices and firm bid prices will be determined by
us at our sole and absolute discretion acting in good faith and in a commercially reasonable manner and
taking into account certain factors as set out on page 125 of this product booklet.
You should note that the amount you receive from selling your Basket DCDC ELIs back to us on
a market making day may be substantially less than the original amount invested. You could lose
part or all of your investment if you choose to sell your Basket DCDC ELIs back to us before
expiry.
— 64 —
C-8
Also, your distributor may charge you a handling fee when you sell your Basket DCDC ELIs back to
us on a market making day and such fees or charges will reduce the amount you receive when you sell
your Basket DCDC ELIs back to us before expiry. Please contact your distributor for details.
Also, you should note that indicative bid prices and/or firm bid prices and/or market making
activities may not be available on a market making day if the relevant Basket DCDC ELI is
affected by market disruption events and/or suspension of trading in a reference asset in the
basket or if we (as market agent) experience any technical problems beyond our control affecting
our ability to provide a bid price for our Basket DCDC ELIs, including any power failure or
breakdown of our computer system.
Please refer to the section headed “Is there any market making arrangements for your Basket DCDC
ELIs before their expiry?” in this product booklet for further details.
•
If you choose to exercise your post-sale cooling off right, the cash amount returned to
you may be substantially less than the original amount invested
If you have purchased a Basket DCDC ELI with an investment period of more than one year, you can
choose to cancel or unwind the whole (and not part of) your Basket DCDC ELI purchase order during
the period from (and including) the date you place your purchase order to (and including) the 5th Hong
Kong business day after that date (this period is referred to as the “post-sale cooling-off period”). If you
submit your instructions to unwind your Basket DCDC ELI purchase order to your distributor after your
Basket DCDC ELI purchase order has been executed on the trade date, the cash amount returned to you
will be reduced by any market value adjustments (the value of which will be determined by us in good
faith and in a commercially reasonable manner and will depend on factors such as market interest rate
movements, HSBC’s financial condition, the market’s view of HSBC’s credit quality, the value of the
embedded conditional put option and the price performance and price volatility of the reference assets
in the basket). Our transaction costs (if any), including any cost which has been incurred by us in
unwinding the hedging arrangements relating to the relevant Basket DCDC ELI will also be included
in the calculation of the market value adjustments. If you submit your instructions to cancel your Basket
DCDC ELI purchase order to your distributor before your Basket DCDC ELI purchase order has been
executed on the trade date, there will be no market value adjustment. However, in both cases, your
distributor may charge you a handling fee when you cancel or unwind your Basket DCDC ELI purchase
order and (if applicable) such handling fee will be deducted from the cash amount returned to you.
Please check with your distributor for further details. The cash amount returned to you may be
substantially less than the original amount invested.
•
Post-sale cooling-off right only applies to our Basket DCDC ELIs with an investment
period of more than one year
You should note that the right to cancel or unwind your Basket DCDC ELI purchase order during the
post-sale cooling-off period DOES NOT apply to Basket DCDC ELIs with an investment period of one
year or less.
Please refer to the section headed “Is there a post-sale cooling-off period for our Basket DCDC ELIs?”
in this product booklet for further details.
•
Our Basket DCDC ELIs contain an autocall condition. You will be subject to
re-investment risk when you purchase our Basket DCDC ELIs
Our Basket DCDC ELIs contain an autocall condition. If the closing price of the worst performing asset
is at or above its call price on a call date, the autocall condition will be satisfied on that call date and
we will terminate our Basket DCDC ELIs before expiry (regardless of whether a knock-in event (if
applicable) has occurred). We will pay you on the early settlement date the nominal amount of the
Basket DCDC ELIs (less any cash settlement expenses) and any accrued potential cash dividend
amount calculated up to (and including) that call date. No further potential cash dividend amount will
be payable following termination of the Basket DCDC ELIs. You may not be able to enjoy the same
rate of return if you re-invest these proceeds in other investments with similar risk parameters.
— 65 —
•
Our Basket DCDC ELIs are not listed on any stock exchange, they are not covered by
the Investor Compensation Fund
As our Basket DCDC ELIs are not listed, they are not covered by the investor compensation fund if
your distributor or any other intermediary defaults.
•
When you buy our Basket DCDC ELIs, you will be relying on the issuer’s
creditworthiness
C-2(l)
When purchasing our Basket DCDC ELIs, you will be relying upon HSBC’s creditworthiness. Our
Basket DCDC ELIs represent our general, unsecured and unsubordinated contractual obligations and
are not secured on any assets or any collateral.
If we become insolvent or default on our obligations under the Basket DCDC ELIs, you will have to
rely on your distributor (directly or indirectly via its custodian) to take action on your behalf to claim
as an unsecured creditor of HSBC (as issuer) regardless of the price performance of the reference assets
in the basket and you will have no rights under the terms of the Basket DCDC ELIs against the issuers
of the reference assets. In the worst case scenario, you may get nothing back and the maximum loss
could be 100% of the original amount invested.
We are not the ultimate holding company of the group to which we belong and with which our name
is identified. The ultimate holding company of our group is HSBC Holdings plc. We, The Hongkong
and Shanghai Banking Corporation Limited, are a company incorporated in Hong Kong with limited
liability and a licensed bank regulated by the Hong Kong Monetary Authority and it is our
creditworthiness, instead of the creditworthiness of HSBC Holdings plc, which you will be relying on
when you buy our Basket DCDC ELIs. There is no guarantee given by anyone (including HSBC
Holdings plc) in respect of our payment and/or delivery obligations as the issuer under our Basket
DCDC ELIs.
You should refer to the programme memorandum and any addendum to the programme memorandum
referred to in the relevant term sheet for our corporate and financial information.
•
You do not have direct contractual rights to enforce our Basket DCDC ELIs
Our Basket DCDC ELIs will be represented by a single global certificate in registered form (which will
be registered in the name of the nominee for the relevant clearing system(s)). As a result, the legal
holder of our Basket DCDC ELIs will be the relevant nominee of the relevant clearing system(s).
You do not have any direct contractual rights against us as the issuer, if we fail to pay any cash amount
or deliver the physical settlement amount to the legal holder of our Basket DCDC ELIs in accordance
with the terms and conditions of our Basket DCDC ELIs. To assert your rights as an investor in our
Basket DCDC ELIs, you will have to rely on your distributor (directly or indirectly via its custodian)
to take action on your behalf. Your distributor (if it is a participant or accountholder with the relevant
clearing system(s)) or its custodian will be given direct rights of enforcement against us as the issuer
of the Basket DCDC ELIs under a deed of covenant executed by us if we fail to pay any cash amount
or deliver the physical settlement amount to the legal holder of our Basket DCDC ELIs in accordance
with the terms and conditions of our Basket DCDC ELIs.
If your distributor fails to take action in accordance with your instructions or if your distributor’s
custodian fails to take action in accordance with the instructions of your distributor, or your distributor
(or its custodian) becomes insolvent or defaults on its obligations, you will not have any direct
contractual rights against us or such custodian and you will need to take action against your distributor
in accordance with the terms of arrangement between you and your distributor.
It is therefore important that you familiarise yourself with, and ensure you understand your relationship
with your distributor in relation to the holding arrangements of our Basket DCDC ELIs and the
arrangements with your distributor regarding taking action against your distributor, your distributor’s
— 66 —
C-2(n)
custodian (if applicable) or against us upon a default of our obligations under our Basket DCDC ELIs.
If you do not understand such arrangements with your distributor or you would like to know the steps
to enforce your rights under the Basket DCDC ELIs, you should obtain independent professional
advice.
•
You will also be relying on the creditworthiness of your distributor or its custodian or
the relevant clearing system through which you hold our Basket DCDC ELIs
Your distributor will hold the Basket DCDC ELIs you have purchased for you, directly or through its
custodian, in accounts at the relevant clearing system(s). There is no assurance of protection against a
default by your distributor or, where applicable, such custodian or the relevant clearing system, in
respect of their obligations under the terms of the relevant account keeping or custodian agreement.
Depending on the terms of the relevant account keeping or custodian agreement, upon the insolvency
or default of your distributor or such custodian or the relevant clearing system, you may have a claim
only as an unsecured creditor of such distributor or custodian (via the distributor) or the relevant
clearing system (via your distributor or its custodian) regardless of the price performance of the
reference assets in the basket and regardless of whether we (as issuer) have defaulted in our obligations
under the Basket DCDC ELIs. In addition, you do not have direct contractual rights against your
distributor’s custodian or the relevant clearing system. Even if the Basket DCDC ELIs you purchased
do not form part of the pool of assets which are applied towards satisfying the claims of the general
unsecured creditors of the insolvent or defaulted distributor or custodian or the relevant clearing
system, there could still be substantial delay before you could receive the cash paid or the physical
settlement amount delivered under the Basket DCDC ELIs if your distributor or its custodian or the
relevant clearing system becomes insolvent or defaults under its obligations. In the worst case
scenario, you may get nothing back and the maximum loss could be 100% of your investment
amount.
•
You have no rights in any of the reference assets in the basket unless and until the
physical settlement amount (if applicable) is determined on the expiry date to be
deliverable to you
Our Basket DCDC ELIs are structured investment products embedded with derivatives: you have no
rights in any of the reference assets in the basket, (including any right to vote and to receive dividends
or other distributions), except in the case where you have elected for physical settlement and it is
determined on the expiry date that the physical settlement amount is to be delivered to you on the
settlement date. In the case where the worst performing asset which forms the physical settlement
amount is determined on the expiry date to be deliverable to you under the terms and conditions of the
Basket DCDC ELIs, you are entitled to all those rights attaching to such worst performing asset as if
you had been registered as the holder of such worst performing asset from (and including) the expiry
date. However, you should note that during the period from the expiry date and until such time as such
worst performing asset is delivered to you, we are not under any obligation (i) to deliver to you any
letter, certificate, notice, circular, dividend, distribution or any other document or payment whatsoever
received by us or our affiliate(s) in our capacity as the registered holder of such worst performing asset;
or (ii) to exercise any or all rights (including voting rights) attaching to such worst performing asset.
We are not liable to you in respect of any loss or damage which you may suffer as a result, whether
directly or indirectly, of us or our affiliate(s) being registered as the legal owner of such worst
performing asset during such period. However, we will notify you of the receipt of any dividend,
distribution, bonus issue, share or units issued pursuant to a share split or consolidation, by us during
such period, in respect of such worst performing asset beneficially owned by you, and make available
such dividend or distribution payment of such worst performing asset to you in a commercially
reasonable manner upon production of such evidence of entitlement and identification as we may
reasonably require. Please refer to conditions 4(g) and 4(h) of the general terms and conditions of the
Basket DCDC ELIs as set out in Appendix B to this product booklet for further details.
•
The market value of our Basket DCDC ELIs may fluctuate
Changes in the market price of the reference assets may not lead to any corresponding change in the
market value of our Basket DCDC ELIs. The market value of our Basket DCDC ELIs will fluctuate
— 67 —
C-2(n)
depending on factors such as market interest rate movements, HSBC’s financial condition, the market’s
view of HSBC’s credit quality, the value of the embedded conditional put option, the price performance
and price volatility of the reference assets in the basket and any accrued potential cash dividend
amount. In extreme circumstances, you may lose all of the original amount invested.
•
The potential gain or potential loss on our Basket DCDC ELIs is affected by
distributor’s charges and any cash or physical settlement expenses
Your potential gain on our Basket DCDC ELIs will be reduced, or your potential loss will be increased,
by any handling fee your distributor charges when you make your application and any fees it charges
to open and maintain your securities or investment account. Please contact your distributor for more
information about the amount of the relevant charges payable. Your potential gain on our Basket DCDC
ELIs will also be reduced, or your potential loss will be increased, by any cash settlement expenses or
physical settlement expenses payable on settlement. For further details on the cash and physical
settlement expenses payable for our Basket DCDC ELIs, please refer to the relevant term sheet.
Your distributor may also charge you a handling fee when you cancel or unwind your Basket DCDC
ELI purchase order during the post-sale cooling-off period or sell your Basket DCDC ELIs back to us
on a market making day and such fees or charges will reduce the amount you receive when you cancel
or unwind your Basket DCDC ELI purchase order or sell your Basket DCDC ELIs back to us before
expiry. Please ask your distributor for details.
•
The English version of the terms and conditions of our Basket DCDC ELIs prevails
over the Chinese version
For the purpose of lodgement with the relevant clearing system(s), the global certificate representing
a series of Basket DCDC ELIs and the terms and conditions of the Basket DCDC ELIs are issued in
the English language only. Therefore, if there is any inconsistency between the Chinese version of the
terms and conditions of our Basket DCDC ELIs and the English version, the English version will
prevail over the Chinese version. If you do not understand the English version, you should obtain
independent professional advice.
•
Exposure to risk from trade date
You should note that as all the commercial variables of our Basket DCDC ELIs are determined on the
trade date, you will be subject to the terms and conditions of our Basket DCDC ELIs from the trade
date and you will be exposed to the market risk and the price movement of the reference assets from
the trade date which may affect the market value of the Basket DCDC ELIs.
•
You will be committed to purchase the Basket DCDC ELIs before all of the
commercial variables are determined
The commercial variables (including the initial spot prices, the exercise prices, the call prices, the floor
prices and the knock-in prices (if applicable) of the reference assets in the basket) will not be available
at the time you place your Basket DCDC ELI purchase order with your distributor.
As such commercial variables will only be determined on the trade date, you will not know the exact
levels of such commercial variables at the time of your purchase order and you will have to bear the
risk of changing market conditions between the date you purchased your Basket DCDC ELI and the
trade date. Once you place your Basket DCDC ELI purchase order with your distributor, you are
committed to purchase such Basket DCDC ELI before such trade specific commercial variables are
determined, subject to exercise of your post-sale cooling-off right or your right to cancel your order
following the publication of an updated programme memorandum and/or addendum to the programme
memorandum and/or this product booklet during the offer period after you have placed your order.
— 68 —
•
There could be conflicts of interest arising out of our other activities which may affect our
Basket DCDC ELIs
We are the issuer and the arranger to our Programme and we are also the market agent and a distributor
for our Basket DCDC ELIs. We and our subsidiaries and affiliates may engage in transactions
involving, and may provide investment banking and other services to, any company or fund referenced
by our Basket DCDC ELIs or their securities. Those transactions may have a positive or negative
impact on the market value of our Basket DCDC ELIs. We and our subsidiaries and affiliates may have
officers who serve as directors of any of the companies which is one of the issuers of the reference
assets of our Basket DCDC ELIs. We may issue other competing financial products which may affect
the market value of our Basket DCDC ELIs.
You should note that potential and actual conflicts of interest may arise from the various activities and
transactions undertaken in the ordinary course of our and our subsidiaries and affiliate’s businesses.
Although our economic interests in these activities and transactions may be adverse to your interests
in our Basket DCDC ELIs, we maintain regulatorily required information barriers between our different
business areas as well as policies and procedures designed to minimise and manage such conflicts of
interest to comply with applicable laws and regulations, and to ensure our transactions and/or dealings
will be transacted at arm’s length.
•
If the physical settlement amount is deliverable to you, there are risks of settlement
disruption or delay
If the physical settlement amount is deliverable to you, the physical settlement amount will only be
delivered to you on the settlement date. Therefore, you will be exposed to any movement in the market
price of the worst performing asset which forms the physical settlement amount during the period
between the expiry date and the settlement date, which will be a period of 3 business days.
All settlement of the physical settlement amount would be effected through the Central Clearing and
Settlement System (“CCASS”). Our ability to effect electronic settlement of the physical settlement
amount may be restricted if there are disruptions within CCASS.
If this occurs, delivery of the physical settlement amount to the legal holder of our Basket DCDC ELIs
and to your distributor or its custodian (which are registered as accountholders or participants of the
Basket DCDC ELIs in the clearing system(s) entitled to receive the physical settlement amount) will
be postponed to the following CCASS business day which is not affected by such settlement
disruptions. This will result in delays in you receiving the physical settlement amount.
If such settlement disruption event persists on the 8th CCASS business day after the scheduled
settlement date, we will seek to deliver the physical settlement amount to the legal holder of the Basket
DCDC ELIs (who will in turn arrange to deliver the same to your distributor or its custodian) as soon
as practicable in a commercially reasonable manner outside CCASS. If we determine in our sole and
absolute discretion acting in good faith and in a commercially reasonable manner that the physical
settlement amount cannot be delivered in any other commercially reasonable manner outside CCASS,
the settlement date will be postponed until delivery can be effected through CCASS or in any other
commercially reasonable manner.
There is no assurance on the duration of such delay. Where such a delay occurs, movements in the
market price of the worst performing asset could affect the market value of the physical settlement
amount delivered on the postponed settlement date. We will not pay any extra amount for any delay in
delivery of the physical settlement amount.
•
Investing in Basket DCDC ELIs may involve exchange rate risk
Our Basket DCDC ELIs may be issued and settled in a currency other than Hong Kong dollars. Where
necessary, we will convert the settlement currency into Hong Kong dollars (being the currency in which
the reference assets trade) or convert Hong Kong dollars into the settlement currency at the exchange
rate on the expiry date as specified in the relevant term sheet in making calculations under the Basket
DCDC ELIs (if applicable).
— 69 —
C-22
If the Basket DCDC ELIs are not denominated in your home currency, the amount you receive when
converting the foreign currency payments you receive under the Basket DCDC ELIs back to your home
currency will be affected by fluctuation in the exchange rate between the settlement currency and your
home currency. You should note that fluctuations in the exchange rate may have an adverse impact
on your financial return on our Basket DCDC ELIs.
•
We may adjust the terms and conditions of the Basket DCDC ELIs or substitute a
reference asset(s) in the basket or early terminate the Basket DCDC ELIs in our sole
and absolute discretion acting in good faith and in a commercially reasonable manner
If we determine that (i) an event which has a diluting or concentrative effect on the theoretical value
of a reference asset in the basket has occurred (including but not limited to, a subdivision or
consolidation of that reference asset, a bonus or rights issue) or (ii) a merger event or (iii) a tender offer
affecting a reference share or a company issuing the reference share or a reference fund in the basket
has occurred (details of which are set out in condition 6(a) of the general terms and conditions of the
Basket DCDC ELIs as set out in Appendix B to this product booklet), we will determine any
corresponding adjustment to be made to the terms of the Basket DCDC ELIs to account for that event
so as to preserve the economic equivalence of the relevant Basket DCDC ELI.
If we determine that any adjustment to the terms of the Basket DCDC ELIs is not appropriate to account
for the relevant merger event or tender offer (as described above) and to preserve the economic
equivalence of the Basket DCDC ELIs, we will seek to substitute the affected reference asset(s) with
another reference asset(s) (selected by us in our sole and absolute discretion acting in good faith and
in a commercially reasonable manner) which meets the criteria of: (i) listed on the same stock exchange
and not already comprised in the basket and (ii) belongs to a similar economic sector as the affected
reference asset and (iii) has a similar market capitalisation as the affected reference asset. If we
determine that we are unable to find a substitute asset which meets all of the above criteria, then we
will seek to substitute the affected reference asset(s) with another reference asset(s) (selected by us in
our sole and absolute discretion acting in good faith and in a commercially reasonable manner) which
meets the criteria of (i) and (ii) above only. If we determine that substitution of the affected reference
asset(s) is appropriate to account for that event, we will continue our Basket DCDC ELIs and make such
substitution as described above and make any further adjustments to the terms of the Basket DCDC
ELIs as we think fit to account for that event, provided that any such substitution and adjustment is not
considered by us to be materially prejudicial to the holders of such Basket DCDC ELIs generally.
If we determine that the substitution of the affected reference asset(s) is not appropriate to account for
that event, we will early terminate our Basket DCDC ELIs and pay you as soon as practicable a fair
market value of our Basket DCDC ELIs as of the date of termination of our Basket DCDC ELIs
(determined by us in our sole and absolute discretion acting in good faith and in a commercially
reasonable manner). The fair market value of the Basket DCDC ELIs will depend on factors such as
market interest rate movements, HSBC’s financial condition, the market’s view of HSBC’s credit
quality, the value of the embedded conditional put option, the price performance and price volatility of
the reference assets in the basket and any accrued potential cash dividend amount. It will also take into
account any cost which is, or would be, incurred by us in unwinding our hedging arrangements.
Depending on the then prevailing market conditions, this fair market value may be less, or
substantially less, than the original amount invested.
If we determine that (i) an insolvency; (ii) a nationalisation; (iii) a delisting; (iv) a change in law; (v)
an increased cost of hedging; (vi) an insolvency filing; or (vii) a fund termination event affecting a
reference share or a company issuing the reference share or a reference fund has occurred (details of
which are set out in condition 6(a) of the general terms and conditions of the Basket DCDC ELIs as
set out in Appendix B to this product booklet), we will seek to substitute the affected reference asset(s)
with another reference asset(s) selected by us in our sole and absolute discretion acting in good faith
and in a commercially reasonable manner based on the same method of selection as stated above. If we
determine that substitution of the affected reference asset(s) is appropriate to account for that event, we
will continue our Basket DCDC ELIs and make such substitution as described above and make any
further adjustments to the terms of the Basket DCDC ELIs as we think fit to account for that event,
provided that any such substitution and adjustment is not considered by us to be materially prejudicial
to the holders of such Basket DCDC ELIs generally. If we determine that the substitution of the affected
reference asset(s) is not appropriate to account for that event, we will early terminate our Basket DCDC
— 70 —
C-10(d)(e)
C-2(l)
ELIs and pay you as soon as practicable a fair market value (as described in the preceding paragraph)
of our Basket DCDC ELIs as of the date of termination of our Basket DCDC ELIs (determined by us
in our sole and absolute discretion acting in good faith and in a commercially reasonable manner).
Depending on the then prevailing market conditions, this fair market value may be less, or
substantially less, than the original amount invested.
You should refer to the section headed “Our Basket DCDC ELIs — Extraordinary Unforeseeable
Events and Adjustments” on pages 93 to 99 of this product booklet and the general terms and conditions
of the Basket DCDC ELIs (in particular, condition 6) as set out in Appendix B to this product booklet
for further details. Any adjustments or substitution of the affected reference asset(s) or early
termination of the Basket DCDC ELIs will be determined by us in our sole and absolute discretion
acting in good faith and in a commercially reasonable manner; and such adjustments or
substitution of the affected reference asset(s) could have an adverse effect on the market value of
your Basket DCDC ELIs.
•
The unwinding of hedging arrangements relating to our Basket DCDC ELIs could
itself affect the market prices of the reference assets in the basket
We may enter into hedging transactions with counterparties in the market in order to enable us to
receive any potential cash dividend amount, any early settlement amount or final settlement payout (as
the case may be) due to you under our Basket DCDC ELIs. These transactions would typically involve
contracts for the purchase and/or sale of the reference assets in the basket and the establishment of long
and/or short positions in the reference assets which may be constantly adjusted. The unwinding or
adjustment of the positions in the reference assets may itself affect the market prices of the reference
assets, particularly if there is otherwise low trading volume in the reference assets at that time. It is
possible that this activity could affect the closing price of the worst performing asset on each trading
day during the relevant calculation period of the Basket DCDC ELIs to fall below its floor price,
resulting in a lower, or no, variable potential cash dividend amount. It is also possible that this activity
could cause the closing price of the worst performing asset on a call date to fall below its call price,
resulting in no autocall condition being met for early termination of the Basket DCDC ELIs; or (if
applicable) cause the closing price of the worst performing asset on a knock-in event date to fall below
its knock-in price or the closing price of the worst performing asset on the expiry date to fall below its
exercise price and call price, resulting in the delivery of the physical settlement amount (together with
a cash payment for any fractional shares or units of the worst performing asset on the expiry date) or
payment of the cash equivalent of the physical settlement amount on the settlement date. In this case,
you will suffer a loss if the market value of the physical settlement amount (together with any
fractional shares or units of the worst performing asset on the expiry date) (in both cases
calculated based on the closing price of the worst performing asset on the expiry date) or the cash
equivalent of the physical settlement amount, together with any potential cash dividend amount(s)
paid during the scheduled tenor of the Basket DCDC ELIs, is less than the original amount
invested. In an extreme case, you will not receive any potential cash dividend amount for the
entire scheduled tenor and the physical settlement amount or its cash equivalent could be worth
nothing and you could lose all of your investment.
•
Risks related to real estate investment trusts (“REITs”) and exchange traded funds
(“ETFs”) in general
Each REIT or ETF is managed by its manager and the investment objectives and investment restrictions
of the relevant fund may change from time to time. Neither we nor our affiliates have any control over
the decisions made by the manager regarding the relevant fund and have no rights against the manager
for its decisions. The manager of the relevant fund is not involved in the offer of our Basket DCDC
ELIs in any way and has no obligation to consider your interests in taking any action that might affect
the market price of the units of the relevant fund and, in turn, affect the potential return of our Basket
DCDC ELIs. The manager’s decisions may have an adverse impact on the potential return of the Basket
DCDC ELIs.
There is also a risk that the investment objectives and/or investment restrictions as set out in the
constitutive documents in relation to the relevant fund are materially changed or are not complied with
or the method of calculating the net asset value of the relevant fund is materially changed during the
— 71 —
investment period of the relevant series of Basket DCDC ELIs. In addition, the applicable laws and
regulations governing the relevant fund may also restrict the operations of the relevant fund and restrict
its ability to achieve the investment objectives. Such risks may have a negative impact on the
performance of the relevant fund and therefore on the potential return of our Basket DCDC ELIs.
You should read the offering documents of the relevant fund for further information about the risks
applicable to the relevant fund.
•
Risk factors specific to Basket DCDC ELIs linked to an ETF
The investment objective of most ETF is to track the performance of the equity(ies) or assets underlying
the ETFs or, as the case may be, a specified index.
An ETF is exposed to the political, economic, currency and other risks related to the underlying
equity(ies), assets or index that the ETF is designed to track.
There may also be disparity between the performance of the ETF and the performance of the underlying
equity(ies), assets or index that the ETF is designed to track as a result of, for example, failure of the
tracking strategy, currency differences, fees and expenses. In addition, where the index or equity(ies)
or assets that the ETF tracks is subject to restricted access, the efficiency in the unit creation or
redemption to keep the price of the ETF in line with its net asset value may be disrupted, causing the
ETF to trade at a premium or discount to its net asset value. Such risks may have a negative impact on
the performance of the ETF and therefore on the potential return of our Basket DCDC ELIs.
•
Risks factors specific to Basket DCDC ELIs linked to a synthetic ETF
Some ETFs may not invest directly in the index constituents but instead they may synthetically
replicate the performance of the relevant index by investing in derivatives issued by market
counterparties that are linked to the index constituent or the index. For these synthetic ETFs, you are
exposed to the credit risk of the counterparties which issue the derivatives, in addition to the risks
relating to the index. Potential contagion and concentration risks of these counterparties which issue the
derivatives should also be taken into account (for example, since these counterparties are
predominantly international financial institutions, the failure of one derivative counterparty of a
synthetic ETF may have a “knock-on” effect on other derivative counterparties of the synthetic ETF).
Some synthetic ETFs have collateral to reduce counterparty risk, but there may be a risk that the market
value of the collateral has fallen substantially when the synthetic ETF seeks to realise the collateral.
In addition, a higher liquidity risk is involved if a synthetic ETF is embedded with derivatives which
do not have an active secondary market, and wider bid-offer spreads in the price of the derivatives may
result in losses. There may also be disparity between the performance of the synthetic ETF and the
performance of the underlying index due to, for instance, failure of the tracking strategy of the synthetic
ETF, currency differences, fees and expenses.
The value of the embedded derivatives and the synthetic ETF may fall substantially in the
circumstances described above and may have an adverse impact on the potential return of our Basket
DCDC ELIs.
•
Risk factors specific to Basket DCDC ELIs linked to a REIT
The investment objective of REITs is to invest in a real estate portfolio.
Each REIT is exposed to risks relating to investments in real estate, including but not limited to (a)
adverse changes in political or economic conditions, (b) changes in interest rates and the availability
of debt or equity financing, which may result in an inability by the REIT to maintain or improve the
real estate portfolio and finance future acquisitions, (c) changes in environmental, zoning and other
governmental rules, (d) changes in market rents, (e) any required repair and maintenance of the
portfolio properties, (f) breach of any property laws or regulations, (g) the relative illiquidity of real
estate investments, (h) real estate taxes, (i) any hidden interests in the portfolio properties, (j) any
increase in insurance premiums and (k) any uninsurable losses.
— 72 —
There may also be disparity between the market price of the units of a REIT and the net asset value per
unit. This is because the market price of the units of a REIT also depends on many factors, including
but not limited to (i) the market value and perceived prospects of the real estate portfolio, (ii) changes
in economic or market conditions, (iii) changes in market valuations of similar companies, (iv) changes
in interest rates, (v) the perceived attractiveness of the units of the REIT against those of other equity
securities, (vi) the future size and liquidity of the market for the units and the REIT market generally,
(vii) any future changes to the regulatory system, including the tax system and (viii) the ability of the
REIT to implement its investment and growth strategies and to retain its key personnel. Such risks may
have a negative impact on the performance of the units of the REIT and therefore on the potential return
of our Basket DCDC ELIs.
— 73 —
HYPOTHETICAL EXAMPLES FOR BASKET DCDC ELIs WITHOUT KNOCK-IN FEATURE
The following hypothetical examples are for illustrative purposes only and do not reflect a complete analysis of all
possible gain or loss scenarios. You must not rely on them as an indication of the price performance of the reference assets
in the basket or the payout on the Basket DCDC ELIs. They do not take into account any expenses payable by the
investor.
In this example, suppose an investor bought 10 Basket DCDC ELIs (with daily autocall condition*) with the following
terms:
*
Reference assets in the Basket
Reference asset 1
Reference asset 2
Scheduled tenor of the Basket DCDC ELIs (being the
period from (and including) the issue date to (and
including) the settlement date)
360 days
Investment period of the Basket DCDC ELIs (being the
period from (and including) the trade date to (and
including) the expiry date):
365 days
Initial spot price on trade date
HKD91.70
Issue price for each Basket DCDC ELI (100% of
nominal amount)
HKD10,000
Nominal amount for each Basket DCDC ELI
HKD10,000
Total issue price for 10 Basket DCDC ELIs
HKD100,000
Total nominal amount for 10 Basket DCDC ELIs
HKD100,000
Exercise price (90% of the initial spot price)
(for the determination of payout at expiry)
HKD82.5300
HKD20.2500
Call price (100% of the initial spot price)
(for the determination of whether the autocall condition
is satisfied and payout at expiry)
HKD91.7000
HKD22.5000
Floor price (90% of the initial spot price)
(for the determination of the number of “days in” and
“days out” in the variable accrual formula)
HKD82.5300
HKD20.2500
Method for calculating the potential cash dividend
amount for each calculation period
1st calculation period: Fixed amount
2nd to 4th calculation periods: Variable amount
“Total days” in each calculation period
65
Fixed cash dividend rate
4.50%
Day-in cash dividend rate
4.50%
Day-out cash dividend rate
0.51%
Call dates*
Each trading day from (and including) the 1st
calculation period end date to (but excluding) the expiry
date
HKD22.50
This example assumes the daily autocall condition applies. If the periodic autocall condition is applicable, the call
dates will be set as certain calculation period end dates (excluding the expiry date) as set out in the relevant term
sheet.
— 74 —
C-7
C-17
Scenario 1 — Assume that the daily autocall condition is satisfied
Performance of reference assets (%)
C-19
Daily autocall condition is satisfied on the 30th trading day of the 2nd calculation period
125
Call Price (% of initial spot price)
100
Exercise Price; Floor Price (% of initial spot price)
75
50
25
Investment period
0
Trade Date
1st Calculation Period
2nd Calculation Period
3rd Calculation Period
Expiry Date
End Date (65th trading day) End Date (130th trading day) End Date (195th trading day) (260th trading day)
/ 1st Call Date
Call dates
(each trading day from (and including) the 1st calculation period end date to (and
excluding) the expiry date)
Performance of reference asset 1 (% of initial spot price)
Performance of reference asset 2 (% of initial spot price)
•
Which is the worst performing asset on the 30th trading day of the 2nd calculation period?
Assume that the closing price of reference asset 1 and reference asset 2 on the 30th trading day of the 2nd calculation
period is HKD100.00 and HKD22.50, respectively. Hence, the performance of each reference asset in the basket on
such date is calculated as follows:
— Performance of reference asset 1
=
HKD100.00
HKD91.70
x 100% = 109.0513%
— Performance of reference asset 2
=
HKD22.50
HKD22.50
x 100% = 100.0000%
As reference asset 2 has the lowest performance, it will be the worst performing asset on the 30th trading day of
the 2nd calculation period.
The worst performing asset for each of the relevant trading days will be determined by the same methodology as
stated above.
Daily autocall condition is
satisfied
—
The above diagram illustrates that the worst performing asset (being
reference asset 2) closes at its call price on the 30th trading day of
the 2nd calculation period. Hence, the daily autocall condition is
satisfied on this call date and the Basket DCDC ELIs will be early
terminated.
—
Investor receives the aggregate nominal amount of HKD100,000 on the
early settlement date.
— 75 —
Potential cash dividend amount
1st calculation period:
—
Investor receives a fixed potential cash dividend amount of HKD4,500
for the 1st calculation period, calculated as follows:
For each Basket DCDC ELI:
HKD10,000
x
4.50%
= HKD450
For 10 Basket DCDC ELIs: HKD450 x 10 = HKD4,500
2nd calculation period:
—
The above diagram illustrates that the worst performing asset (being
reference asset 2) closes above the floor price on the first 30 trading
days of the 2nd calculation period. A variable potential cash dividend
amount (calculated by reference to the day-in cash dividend rate) is
therefore payable for the 2nd calculation period. (Please refer to the
section headed “Glossary” on page 108 of this product booklet for
details of the formula used to calculate the variable potential cash
dividend amount.)
—
Investor receives a variable potential cash dividend amount of
HKD2,076.90 for the 2nd calculation period (calculated up to (and
including) the call date), calculated as follows:
For each Basket DCDC ELI:
HKD10,000 x 4.50% x 30
65
+ HKD10,000 x 0.51% x
0
= HKD207.69
65
For 10 Basket DCDC ELIs:
HKD207.69 x 10 = HKD2,076.90
Total payout on investment
—
Investor receives a total payout of HKD106,576.90 (being
HKD100,000 (nominal amount) + HKD4,500 (potential cash dividend
amount for the 1st calculation period) + HKD2,076.90 (potential cash
dividend amount for the 2nd calculation period) (up to (and including)
the call date)), which is equivalent to a gain of 6.58%, compared to the
total issue price paid on the issue date.
— 76 —
Scenario 2 — Assume that the daily autocall condition is not satisfied and the closing price of the worst performing
asset is above the exercise price or the call price on the expiry date
Performance of reference assets (%)
C-19
125
100
Call Price (% of initial spot price)
Exercise Price; Floor Price (% of initial spot price)
75
50
25
Investment period
0
Trade Date
1st Calculation Period
2nd Calculation Period
3rd Calculation Period
Expiry Date
End Date (65th trading day) End Date (130th trading day) End Date (195th trading day) (260th trading day)
/ 1st Call Date
Call dates
(each trading day from (and including) the 1st calculation period end date to (and
excluding) the expiry date)
Performance of reference asset 1 (% of initial spot price)
Performance of reference asset 2 (% of initial spot price)
•
Which is the worst performing asset on the 1st calculation period end date?
Assume that the closing price of reference asset 1 and reference asset 2 on the 1st calculation period end date is
HKD100.00 and HKD19.48, respectively. Hence, the performance of each reference asset in the basket on the 1st
calculation period end date is calculated as follows:
— Performance of reference asset 1
=
HKD100.00
HKD91.70
x 100% = 109.0513%
— Performance of reference asset 2
=
HKD19.48
HKD22.50
x 100% = 86.5778%
As reference asset 2 has the lowest performance, it will be the worst performing asset on the 1st calculation period
end date.
The worst performing asset for each of the relevant trading days will be determined by the same methodology as
stated above.
•
Which is the worst performing asset on the first trading day of the 4th calculation period?
Assume that the closing price of reference asset 1 and reference asset 2 on the first trading day of the 4th calculation
period is HKD86.80 and HKD21.32, respectively. Hence, the performance of each reference asset in the basket on
the first trading day of the 4th calculation period is calculated as follows:
— Performance of reference asset 1
=
HKD86.80
HKD91.70
— 77 —
x 100% = 94.6565%
— Performance of reference asset 2
=
HKD21.32
HKD22.50
x 100% = 94.7556%
As reference asset 1 has the lowest performance, it will be the worst performing asset on the first trading day of the
4th calculation period.
The worst performing asset for each of the relevant trading days will be determined by the same methodology as
stated above.
Daily autocall condition is not —
satisfied
The above diagram illustrates that the worst performing asset (being
reference asset 2 for the 1st to the 3rd calculation periods and reference
asset 1 for the 4th calculation period) closes below its call price on each
of the call dates (i.e. each trading day from (and including) the 1st
calculation period end date to (but excluding) the expiry date).
—
Hence, the daily autocall condition is not satisfied on any call date and
the Basket DCDC ELIs will not be early terminated.
Potential cash dividend amount
1st calculation period:
—
Investor receives a fixed potential cash dividend amount of HKD4,500
for the 1st calculation period, calculated as follows:
For each Basket DCDC ELI:
HKD10,000
x
4.50%
= HKD450
For 10 Basket DCDC ELIs: HKD450 x 10 = HKD4,500
2nd calculation period:
—
The above diagram illustrates that the worst performing asset (being
reference asset 2) closes below its floor price on each trading day
during 2nd calculation period. A variable potential cash dividend
amount (calculated by reference to the day-out cash dividend rate) is
therefore payable for the 2nd calculation period. (Please refer to the
section headed “Glossary” on page 108 of this product booklet for
details of the formula used to calculate the variable potential cash
dividend amount.)
—
Investor receives a potential cash dividend amount of HKD510 for the
2nd calculation period, calculated as follows:
For each Basket DCDC ELI:
HKD10,000 x 4.50% x
0
+ HKD10,000 x 0.51% x
65
65
= HKD51
65
For 10 Basket DCDC ELIs: HKD51 x 10 = HKD510
3rd calculation period:
—
The above diagram illustrates that the worst performing asset (being
reference asset 2) closes below its floor price on the first 45 trading
days of the 3rd calculation period.
— 78 —
—
Further, the above diagram illustrates that the worst performing asset
(being reference asset 2) closes at or above its floor price on the last 20
trading days of the 3rd calculation period. A variable potential cash
dividend amount (calculated by reference to the day-in cash dividend
rate and day-out cash dividend rate) is therefore payable for the 3rd
calculation period.
—
Investor receives a potential cash dividend amount of HKD1,737.70 for
the 3rd calculation period, calculated as follows:
For each Basket DCDC ELI:
HKD10,000 x
4.50%
x
20
65
+ HKD10,000 x 0.51% x
45
65
= HKD173.77
For 10 Basket DCDC ELIs: HKD173.77 x 10 = HKD1,737.70
4th calculation period:
—
The above diagram illustrates that the worst performing asset (being
reference asset 1) closes at or above its floor price on each trading day
during the 4th calculation period. A variable potential cash dividend
amount (calculated by reference to the day-in cash dividend rate) is
therefore payable for the 4th calculation period.
—
Investor receives a potential cash dividend amount of HKD4,500 for
the 4th calculation period, calculated as follows:
For each Basket DCDC ELI:
HKD10,000 x 4.50% x 65
65
+ HKD10,000 x 0.51% x
0
= HKD450
65
For 10 Basket DCDC ELIs: HKD450 x 10 = HKD4,500
Final settlement payout on the
settlement date
Total payout on investment
—
The above diagram illustrates that the worst performing asset on the
expiry date (being reference asset 1) closes at HKD85.95, which is
above its exercise price.
—
Investor receives the aggregate nominal amount of HKD100,000 on the
settlement date.
—
Investor receives a total payout of HKD111,247.70 (being:
HKD100,000 (nominal amount) + HKD4,500 (potential cash dividend
amount for the 1st calculation period) + HKD510 (potential cash
dividend amount for the 2nd calculation period) + HKD1,737.70
(potential cash dividend amount for the 3rd calculation period) +
HKD4,500 (potential cash dividend amount for the 4th calculation
period)), which is equivalent to a gain of 11.25%, compared to the total
issue price paid on the issue date.
— 79 —
Scenario 3 — Assume that the daily autocall condition is not satisfied and the closing price of the worst performing
asset is below the exercise price and the call price on the expiry date (worst case scenario)
Performance of reference assets (%)
C-19
125
Call Price (% of initial spot price)
100
Exercise Price; Floor Price (% of initial spot price)
75
50
25
Investment period
0
Trade Date
1st Calculation Period
2nd Calculation Period
3rd Calculation Period
Expiry Date
End Date (65th trading day) End Date (130th trading day) End Date (195th trading day) (260th trading day)
Call dates
(each trading day from (and including) the 1st calculation period end date to (and
excluding) the expiry date)
Performance of reference asset 1 (% of initial spot price)
Performance of reference asset 2 (% of initial spot price)
•
Which is the worst performing asset on the 1st calculation period end date?
Assume that the closing price of reference asset 1 and reference asset 2 on the 1st calculation period end date is
HKD93.30 and HKD1.14, respectively. Hence, the performance of each reference asset in the basket on the 1st
calculation period end date is calculated as follows:
— Performance of reference asset 1
=
HKD93.30
HKD91.70
x 100% = 101.7448%
— Performance of reference asset 2
=
HKD1.14
HKD22.50
x 100% = 5.0667%
As reference asset 2 has the lowest performance, it will be the worst performing asset on the 1st calculation period end
date.
The worst performing asset for each of the relevant trading days will be determined by the same methodology as stated
above.
Daily autocall condition is not —
satisfied
The above diagram illustrates that the worst performing asset (being
reference asset 2) closes below its call prices on each of the call dates (i.e.
each trading day from (and including) the 1st calculation period end date
to (but excluding) the expiry date).
—
Hence, the daily autocall condition is not satisfied on any call dates and
the Basket DCDC ELIs will not be early terminated.
— 80 —
Potential cash dividend amount
1st calculation period:
—
Investor receives a fixed potential cash dividend amount of HKD4,500 for
the 1st calculation period, calculated as follows:
For each Basket DCDC ELI:
HKD10,000
x
4.50%
= HKD450
For 10 Basket DCDC ELIs: HKD450 x 10 = HKD4,500
2nd to 4th calculation periods:
—
The above diagram illustrates that the worst performing asset (being
reference asset 2) closes below its floor price on each trading day during
each of the 2nd to the 4th calculation periods. A variable potential cash
dividend amount (calculated by reference to the day-out cash dividend
rate) is therefore payable for each of the 2nd to the 4th calculation periods.
(Please refer to the section headed “Glossary” on page 108 of this product
booklet for details of the formula used to calculate the variable potential
cash dividend amount.)
—
Investor receives a potential cash dividend amount of HKD510 for each of
the 2nd to the 4th calculation periods, calculated as follows:
For each Basket DCDC ELI:
HKD10,000 x 4.50% x
0
+ HKD10,000 x 0.51% x
65
65
= HKD51
65
For 10 Basket DCDC ELIs: HKD51 x 10 = HKD510
Final settlement payout on the
settlement date
—
The above diagram illustrates that the worst performing asset (being
reference asset 2) closes at HKD0 which is below its exercise price and
call price on the expiry date.
If investor elects for physical settlement:
—
Investor receives the physical settlement amount of 493 units calculated
by reference to the exercise price of HKD20.25 (rounded down to the
nearest whole number of units) of reference asset 2 (being the worst
performing asset) for each Basket DCDC ELI, calculated as follows:
For each Basket DCDC ELI:
HKD10,000
= 493.8272 (rounded to 4 decimal places).
HKD20.25
For 10 Basket DCDC ELIs: 493 units x10 = 4,930 units of reference asset
2.
The physical settlement amount will be rounded down to the nearest
whole number of the worst performing asset and calculated on a
per-Basket DCDC ELI basis.
— 81 —
—
Investor also receives a cash payment of HKD0 for the fractional units for
each Basket DCDC ELI, calculate as follows:
For each Basket DCDC ELI:
0.8272 units x HKD0 = HKD0
For 10 Basket DCDC ELIs: HKD0
If investor elects for cash settlement:
—
Investor receives the cash equivalent of the physical settlement amount of
HKD0 for each Basket DCDC ELI, calculated as follow:
For each Basket DCDC ELI:
HKD10,000
x HKD0 = HKD0.
HKD20.25
For 10 Basket DCDC ELIs: HKD0.
Total payout on investment
—
Investor receives a total payout of HKD6,030, which is equivalent to a
loss of 93.97%, compared to the total issue price paid on the issue
date.
The payout equals: (i) if physical settlement applies: investor receives
4,930 units of the worst performing asset. The market value of such worst
performing asset, calculated based on the closing price of the worst
performing asset on the expiry date = HKD0 (4,930 units x HKD0) +
HKD0 (cash payment for the fractional units) + HKD4,500 (potential cash
dividend amount for the 1st calculation period) + HKD510 x 3 (potential
cash dividend amount for each of the 2nd to the 4th calculation periods);
or
(ii) if cash settlement applies: cash payment of HKD0 (the cash equivalent
of the physical settlement amount) + HKD4,500 (potential cash dividend
amount for the 1st calculation period) + HKD510 x 3 (potential cash
dividend amount for each of the 2nd to the 4th calculation periods).
Additional Scenario — if HSBC as issuer becomes insolvent or defaults on its obligations under the Basket DCDC
ELIs
ⳮ
Assume further that HSBC as issuer becomes insolvent or defaults on its obligations under the Basket DCDC ELIs
during the scheduled tenor of the Basket DCDC ELIs.
ⳮ
Investor can only claim via his distributor (directly or indirectly via its custodian) as an unsecured creditor of HSBC
regardless of the price performance of the reference assets in the basket. In the worst case scenario, the investor may
get nothing back (including the nominal amount of the Basket DCDC ELIs, any accrued potential cash dividend
amounts and the physical settlement amount or cash equivalent of the physical settlement amount) and the potential
maximum loss could be 100% of the original amount invested.
— 82 —
HYPOTHETICAL EXAMPLES FOR BASKET DCDC ELIs WITH KNOCK-IN FEATURE
The following hypothetical examples are for illustrative purposes only and do not reflect a complete analysis of all
possible gain or loss scenarios. You must not rely on them as an indication of the price performance of the reference assets
in the basket or the payout on the Basket DCDC ELIs. They do not take into account any expenses payable by the
investor.
In this example, suppose an investor bought 10 Basket DCDC ELIs (with daily autocall condition* and daily knock-in**)
with the following terms:
Reference assets in the Basket
Reference asset 1
Scheduled tenor of the Basket DCDC ELIs (being the
period from (and including) the issue date to (and
including) the settlement date)
360 days
Investment period of the Basket DCDC ELIs (being the
period from (and including) the trade date to (and
including) the expiry date):
365 days
Initial spot price on trade date
HKD91.70
Issue price for each Basket DCDC ELI (100% of
nominal amount)
HKD10,000
Nominal amount for each Basket DCDC ELI
HKD10,000
Total issue price for 10 Basket DCDC ELIs
HKD100,000
Total nominal amount for 10 Basket DCDC ELIs
HKD100,000
Exercise price (90% of the initial spot price)
(for the determination of payout at expiry)
HKD82.5300
HKD20.2500
Call price (100% of the initial spot price)
(for the determination of whether the autocall condition
is satisfied and payout at expiry)
HKD91.7000
HKD22.5000
Floor price (90% of the initial spot price)
(for the determination of the number of “days in” and
“days out” in the variable accrual formula)
HKD82.5300
HKD20.2500
Knock-in price (65% of the initial spot price)
(for the determination of whether a knock-in event has
occurred)
HKD59.6050
HKD14.6250
Method for calculating the potential cash dividend
amount for each calculation period
1st calculation period: Fixed amount
2nd to 4th calculation periods: Variable amount
“Total days” in each calculation period
65
Fixed cash dividend rate
3.75%
Day-in cash dividend rate
3.75%
Day-out cash dividend rate
0.51%
Call dates*
Each trading day from (and including) the 1st
calculation period end date to (but excluding) the expiry
date
Knock-in event dates**
Each trading day from (but excluding) the trade date to
(and including) the expiry date
*
**
Reference asset 2
HKD22.50
This example assumes the daily autocall condition applies. If the periodic autocall condition is applicable, the call
dates will be set as certain calculation period end dates (excluding the expiry date) as set out in the relevant term
sheet.
This example assumes the daily knock-in event applies. If the at-expiry knock-in event is applicable, the knock-in
event date will be the same day as the expiry date.
— 83 —
C-7
C-17
Scenario 1 — Assume that the daily autocall condition is satisfied
Performance of reference assets (%)
C-19
Daily autocall condition is satisfied on the 30th trading day of the 2nd calculation period
125
Call Price (% of initial spot price)
100
Exercise Price; Floor Price (% of initial spot price)
75
Knock-in Price (% of initial spot price)
50
25
Investment period
0
Trade Date
1st Calculation Period
2nd Calculation Period
3rd Calculation Period
Expiry Date
End Date (65th trading day) End Date (130th trading day) End Date (195th trading day) (260th trading day)
/ 1st Call Date
Call dates
(each trading day from (and including) the 1st calculation period end date to (and
excluding) the expiry date)
Knock-in event dates
(each trading day from (but excluding) the trade date to (and including) the expiry date)
Performance of reference asset 1 (% of initial spot price)
Performance of reference asset 2 (% of initial spot price)
•
Which is the worst performing asset on the 30th trading day of the 2nd calculation period?
Assume that the closing price of reference asset 1 and reference asset 2 on the 30th trading day of the 2nd calculation
period is HKD100.00 and HKD22.50, respectively. Hence, the performance of each reference asset in the basket on
such date is calculated as follows:
— Performance of reference asset 1
=
HKD100.00
HKD91.70
x 100% = 109.0513%
— Performance of reference asset 2
=
HKD22.50
HKD22.50
x 100% = 100.0000%
As reference asset 2 has the lowest performance, it will be the worst performing asset on the 30th trading day of
the 2nd calculation period.
The worst performing asset for each of the relevant trading days will be determined by the same methodology as
stated above.
Daily autocall condition is
satisfied
—
The above diagram illustrates that the worst performing asset (being
reference asset 2) closes at its call price on the 30th trading day of
the 2nd calculation period. Hence, the daily autocall condition is
satisfied on this call date and the Basket DCDC ELIs will be early
terminated.
—
Investor receives the aggregate nominal amount of HKD100,000 on the
early settlement date.
— 84 —
Potential cash dividend amount
1st calculation period:
—
Investor receives a fixed potential cash dividend amount of HKD3,750
for the 1st calculation period, calculated as follows:
For each Basket DCDC ELI:
HKD10,000
x
3.75%
= HKD375
For 10 Basket DCDC ELIs: HKD375 x 10 = HKD3,750
2nd calculation period:
—
The above diagram illustrates that the worst performing asset (being
reference asset 2) closes above the floor price on the first 30 trading
days of the 2nd calculation period. A variable potential cash dividend
amount (calculated by reference to the day-in cash dividend rate) is
therefore payable for the 2nd calculation period. (Please refer to the
section headed “Glossary” on page 108 of this product booklet for
details of the formula used to calculate the variable potential cash
dividend amount.)
—
Investor receives a variable potential cash dividend amount of
HKD1,730.80 for the 2nd calculation period (calculated up to (and
including) the call date), calculated as follows:
For each Basket DCDC ELI:
HKD10,000 x 3.75% x
30
0
+ HKD10,000 x 0.51% x
= HKD173.08
65
65
For 10 Basket DCDC ELIs:
HKD173.08 x 10 = HKD1,730.80
Total payout on investment
—
Investor receives a total payout of HKD105,480.80 (being
HKD100,000 (nominal amount) + HKD3,750 (potential cash dividend
amount for the 1st calculation period) + HKD1,730.80 (potential cash
dividend amount for the 2nd calculation period) (up to (and including)
the call date)), which is equivalent to a gain of 5.48%, compared to the
total issue price paid on the issue date.
— 85 —
Scenario 2 — Assume that the daily autocall condition is not satisfied and a daily knock-in event has occurred and
the closing price of the worst performing asset is above the exercise price or the call price on expiry
date
Performance of reference assets (%)
C-19
A daily knock-in event occurred
125
Call Price (% of initial spot price)
100
Exercise Price; Floor Price (% of initial spot price)
75
Knock-in Price (% of initial spot price)
50
25
Investment period
0
Trade Date
1st Calculation Period
2nd Calculation Period
3rd Calculation Period
Expiry Date
End Date (65th trading day) End Date (130th trading day) End Date (195th trading day) (260th trading day)
/ 1st Call Date
Call dates
(each trading day from (and including) the 1st calculation period end date to (and
excluding) the expiry date)
Knock-in event dates
(each trading day from (but excluding) the trade date to (and including) the expiry date)
Performance of reference asset 1 (% of initial spot price)
Performance of reference asset 2 (% of initial spot price)
•
Which is the worst performing asset on the 1st calculation period end date?
Assume that the closing price of reference asset 1 and reference asset 2 on the 1st calculation period end date is
HKD100.00 and HKD19.48, respectively. Hence, the performance of each reference asset in the basket on the 1st
calculation period end date is calculated as follows:
— Performance of reference asset 1
=
HKD100.00
HKD91.70
x 100% = 109.0513%
— Performance of reference asset 2
=
HKD19.48
HKD22.50
x 100% = 86.5778%
As reference asset 2 has the lowest performance, it will be the worst performing asset on the 1st calculation period
end date.
The worst performing asset for each of the relevant trading days will be determined by the same methodology as
stated above.
— 86 —
•
Which is the worst performing asset on the first trading day of the 4th calculation period?
Assume that the closing price of reference asset 1 and reference asset 2 on the first trading day of the 4th calculation
period is HKD86.80 and HKD21.32, respectively. Hence, the performance of each reference asset in the basket on
the first trading day of the 4th calculation period is calculated as follows:
— Performance of reference asset 1
=
HKD86.80
HKD91.70
x 100% = 94.6565%
— Performance of reference asset 2
=
HKD21.32
HKD22.50
x 100% = 94.7556%
As reference asset 1 has the lowest performance, it will be the worst performing asset on the first trading day of the
4th calculation period.
The worst performing asset for each of the relevant trading days will be determined by the same methodology as
stated above.
Daily autocall condition is not —
satisfied
The above diagram illustrates that the worst performing asset (being
reference asset 2 for the 1st to the 3rd calculation periods and reference
asset 1 for the 4th calculation period) closes below its call price on each
of the call dates (i.e. each trading day from (and including) the 1st
calculation period end date to (but excluding) the expiry date).
—
Hence, the daily autocall condition is not satisfied on any call date and
the Basket DCDC ELIs will not be early terminated.
Potential cash dividend amount
1st calculation period:
—
Investor receives a fixed potential cash dividend amount of HKD3,750
for the 1st calculation period, calculated as follows:
For each Basket DCDC ELI:
HKD10,000
x
3.75%
= HKD375
For 10 Basket DCDC ELIs: HKD375 x 10 = HKD3,750
2nd calculation period:
—
The above diagram illustrates that the worst performing asset (being
reference asset 2) closes below its floor price on each trading day
during the 2nd calculation period. A variable potential cash dividend
amount (calculated by reference to the day-out cash dividend rate) is
therefore payable for the 2nd calculation period. (Please refer to the
section headed “Glossary” on page 108 of this product booklet for
details of the formula used to calculate the variable potential cash
dividend amount.)
—
Investor receives a potential cash dividend amount of HKD510 for the
2nd calculation period, calculated as follows:
For each Basket DCDC ELI:
HKD10,000 x 3.75% x
0
65
+ HKD10,000 x 0.51% x
= HKD51
65
65
For 10 Basket DCDC ELIs: HKD51 x 10 = HKD510
— 87 —
3rd calculation period:
—
The above diagram illustrates that the worst performing asset (being
reference asset 2) closes below its floor price on the first 45 trading
days of the 3rd calculation period.
—
Further, the above diagram illustrates that the worst performing asset
(being reference asset 2) closes at or above its floor price on the last 20
trading days of the 3rd calculation period. A variable potential cash
dividend amount (calculated by reference to the day-in cash dividend
rate and day-out cash dividend rate) is therefore payable for the 3rd
calculation period.
—
Investor receives a potential cash dividend amount of HKD1,506.90 for
the 3rd calculation period, calculated as follows:
For each Basket DCDC ELI:
20
HKD10,000 x
3.75%
x
45
+ HKD10,000 x 0.51% x
65
65
= HKD 150.69
For 10 Basket DCDC ELIs: HKD150.69 x 10 = HKD1,506.90
4th calculation period:
—
The above diagram illustrates that the worst performing asset (being
reference asset 1) closes at or above its floor price on each trading day
during the 4th calculation period. A variable potential cash dividend
amount (calculated by reference to the day-in cash dividend rate) is
therefore payable for the 4th calculation period.
—
Investor receives a potential cash dividend amount of HKD3,750 for
the 4th calculation period, calculated as follows:
For each Basket DCDC ELI:
HKD10,000 x 3.75% x
65
65
+ HKD10,000 x 0.51% x
0
= HKD375
65
For 10 Basket DCDC ELIs: HKD375 x 10 = HKD3,750
Final settlement payout on the
settlement date
Total payout on investment
—
The above diagram illustrates that a daily knock-in event has occurred
in the 2nd calculation period because the worst performing asset for the
2nd calculation period (being reference asset 2) closes at or below its
knock-in price on certain trading days in the 2nd calculation period.
—
The above diagram also illustrates that the worst performing asset on
the expiry date (being reference asset 1) closes at HKD85.95, which is
above its exercise price.
—
Investor receives the aggregate nominal amount of HKD100,000 on the
settlement date.
—
Investor receives a total payout of HKD109,516.90 (being:
HKD100,000 (nominal amount) + HKD3,750 (potential cash dividend
amount for the 1st calculation period) + HKD510 (potential cash
dividend amount for the 2nd calculation period) + HKD1,506.90
(potential cash dividend amount for the 3rd calculation period) +
HKD3,750 (potential cash dividend amount for the 4th calculation
period)), which is equivalent to a gain of 9.52%, compared to the total
issue price paid on the issue date.
— 88 —
Scenario 3 — Assume that the daily autocall condition is not satisfied and a daily knock-in event has occurred and
the closing price of the worst performing asset is below the exercise price and call price on the expiry
date (worst case scenario)
Performance of reference assets (%)
C-19
A daily knock-in event occurred
125
Call Price (% of initial spot price)
100
Exercise Price; Floor Price (% of initial spot price)
75
Knock-in Price (% of initial spot price)
50
25
Investment period
0
Trade Date
1st Calculation Period
3rd Calculation Period
Expiry Date
2nd Calculation Period
End Date (65th trading day) End Date (130th trading day) End Date (195th trading day) (260th trading day)
/ 1st Call Date
Call dates
(each trading day from (and including) the 1st calculation period end date to (and
excluding) the expiry date)
Knock-in event dates
(each trading day from (but excluding) the trade date to (and including) the expiry date)
Performance of reference asset 1 (% of initial spot price)
Performance of reference asset 2 (% of initial spot price)
•
Which is the worst performing asset on the 1st calculation period end date?
Assume that the closing price of reference asset 1 and reference asset 2 on the 1st calculation period end date is
HKD93.30 and HKD1.14, respectively. Hence, the performance of each reference asset in the basket on the 1st
calculation period end date is calculated as follows:
— Performance of reference asset 1
=
HKD93.30
HKD91.70
x 100% = 101.7448%
— Performance of reference asset 2
=
HKD1.14
HKD22.50
x 100% = 5.0667%
As reference asset 2 has the lowest performance, it will be the worst performing asset on the 1st calculation period end
date.
— 89 —
The worst performing asset for each of the relevant trading days will be determined by the same methodology as stated
above.
Daily autocall condition is not
satisfied
Potential cash dividend amount
—
The above diagram illustrates that the worst performing asset (being
reference asset 2) closes below its call prices on each of the call dates (i.e.
each trading day from (and including) the 1st calculation period end date
to (but excluding) the expiry date).
—
Hence, the daily autocall condition is not satisfied on any call dates and
the Basket DCDC ELIs will not be early terminated.
1st calculation period:
—
Investor receives a fixed potential cash dividend amount of HKD3,750 for
the 1st calculation period, calculated as follows:
For each Basket DCDC ELI:
HKD10,000
x
3.75%
= HKD375
For 10 Basket DCDC ELIs: HKD375 x 10 = HKD3,750
2nd to 4th calculation period:
—
The above diagram illustrates that the worst performing asset (being
reference asset 2) closes below its floor price on each trading day during
each of the 2nd to the 4th calculation periods. A variable potential cash
dividend amount (calculated by reference to the day-out cash dividend
rate) is therefore payable for each of the 2nd to the 4th calculation period.
(Please refer to the section headed “Glossary” on page 108 of this product
booklet for details of the formula used to calculate the variable potential
cash dividend amount.)
—
Investor receives a potential cash dividend amount of HKD510 for each of
the 2nd to the 4th calculation periods, calculated as follows:
For each Basket DCDC ELI:
HKD10,000 x 3.75% x
65
0
+ HKD10,000 x 0.51% x
= HKD51
65
65
For 10 Basket DCDC ELIs: HKD51 x 10 = HKD510
Final settlement payout on the
settlement date
—
The above diagram illustrates that a daily knock-in event has occurred in
the 1st calculation period because the worst performing asset for the 1st
calculation period (being reference asset 2) closes at or below its knock-in
price on certain trading days in the 1st calculation period.
—
The above diagram also illustrates that the worst performing asset on the
expiry date (being reference asset 2) closes at HKD0 which is below its
exercise price and call price on the expiry date.
— 90 —
If investor elects for physical settlement:
—
Investor receives the physical settlement amount of 493 units calculated
by reference to the exercise price of HKD20.25 (rounded down to the
nearest whole number of units) of reference asset 2 (being the worst
performing asset) for each Basket DCDC ELI, calculated as follows:
For each Basket DCDC ELI:
HKD10,000
= 493.8272 (rounded to 4 decimal places).
HKD20.25
For 10 Basket DCDC ELIs: 493 units x10 = 4,930 units of reference asset
2.
The number of shares or units of the worst performing asset which form
the physical settlement amount will be rounded down to the nearest whole
number of the worst performing asset and calculated on a per-Basket
DCDC ELI basis.
—
Investor also receives a cash payment of HKD0 for the fractional units for
each Basket DCDC ELI, calculate as follows:
For each Basket DCDC ELI:
0.8272 units x HKD0 = HKD0
For 10 Basket DCDC ELIs: HKD0
If investor elects for cash settlement:
—
Investor receives the cash equivalent of the physical settlement amount of
HKD0 for each Basket DCDC ELI, calculated as follow:
For each Basket DCDC ELI:
HKD10,000
x HKD0 = HKD0.
HKD20.25
For 10 Basket DCDC ELIs: HKD0.
Total payout on investment
—
Investor receives a total payout of HKD5,280, which is equivalent to a
loss of 94.72%, compared to the total issue price paid on the issue
date.
The payout equals: (i) if physical settlement applies: investor receives
4,930 units of the worst performing asset. The market value of such worst
performing asset, calculated based on the closing price of the worst
performing asset on the expiry date = HKD0 (4,930 units x HKD0) +
HKD0 (cash payment for the fractional units) + HKD3,750 (potential cash
dividend amount for the 1st calculation period) + HKD510 x 3 (potential
cash dividend amount for each of the 2nd to the 4th calculation periods);
or
(ii) if cash settlement applies: cash payment of HKD 0 (the cash
equivalent of the physical settlement amount)+ HKD3,750 (potential cash
dividend amount for the 1st calculation period) + HKD510 x 3 (potential
cash dividend amount for each of the 2nd to the 4th calculation periods).
— 91 —
Additional Scenario — if HSBC as issuer becomes insolvent or defaults on its obligations under the Basket DCDC
ELIs
ⳮ
Assume further that HSBC as issuer becomes insolvent or defaults on its obligations under the Basket DCDC ELIs
during the scheduled tenor of the Basket DCDC ELIs.
ⳮ
Investor can only claim via his distributor (directly or indirectly via its custodian) as an unsecured creditor of HSBC
regardless of the price performance of the reference assets in the basket. In the worst case scenario, the investor may
get nothing back (including the nominal amount of the Basket DCDC ELIs, any accrued potential cash dividend
amounts and the physical settlement amount or cash equivalent of the physical settlement amount) and the potential
maximum loss could be 100% of the original amount invested.
— 92 —
— 93 —
C-2(j)(k)(l)
C-10(d)(e)
(a)
If we, as the issuer, become insolvent or default on our → Our Basket DCDC ELIs represent our (as issuer) general, unsecured and
obligations under our Basket DCDC ELIs on or before the
unsubordinated contractual obligations. If we become insolvent or default on our
settlement date of the Basket DCDC ELIs:
obligations under our Basket DCDC ELIs, you will have to rely on your distributor
(directly or indirectly via its custodian) to take action on your behalf to claim as one
of our unsecured creditors, regardless of the price performance of the reference
assets and you will have no rights under the terms of the Basket DCDC ELIs against
the issuers of the reference assets. In the worst case scenario, you may get
nothing back and the potential maximum loss could be 100%of the original
amount invested.
(b) During the investment period, if an event which has a → We will determine in our sole and absolute discretion acting in good faith and in a
commercially reasonable manner any adjustment to be made to the terms of our
diluting or concentrative effect on the theoretical value of
Basket DCDC ELIs (including, for example, adjusting the exercise price, the
the reference asset(s) has occurred (including but not
knock-in price (if applicable), the call price and the floor price of the affected
limited to, a subdivision or consolidation of the reference
reference asset(s)) to account for that diluting or concentrative event so as to
asset(s), a bonus or rights issue) (as more particularly set
preserve the economic equivalence of the relevant Basket DCDC ELIs. Such
out in condition 6(a) of the general terms and conditions of
adjustments could have an adverse effect on the market value of your Basket
the Basket DCDC ELIs as set out in Appendix B to this
DCDC ELIs.
product booklet):
As we cannot foresee all extraordinary unforeseeable events that can occur in
relation to us or the reference assets, we may have to adjust the terms of our Basket
DCDC ELIs or early terminate our Basket DCDC ELIs upon the occurrence of these
events.
Extraordinary unforeseeable events; Adjustments to terms and conditions
What do you get if an extraordinary unforeseeable event
occurs in respect of the Basket DCDC ELIs?
A.
OUR BASKET DCDC ELIS — EXTRAORDINARY UNFORESEEABLE EVENTS AND ADJUSTMENTS
— 94 —
(c)
listed on the same stock exchange and not already comprised in the basket;
and
If we determine (in our sole and absolute discretion acting in good faith and in a
commercially reasonable manner) that substitution of the affected reference asset(s)
is appropriate to account for that event, we will continue our Basket DCDC ELIs
and make such substitution as described above and make any further adjustments to
the terms of the Basket DCDC ELIs as we think fit (acting in good faith and in a
commercially reasonable manner) to account for that event, provided that any such
substitution and adjustment is not considered by us to be materially prejudicial to
the holders of such Basket DCDC ELIs generally. Such substitution and
adjustment could have an adverse effect on the market value of the Basket
DCDC ELIs.
If we determine (in our sole and absolute discretion acting in good faith and in a
commercially reasonable manner) that we are unable to find a substitute asset which
meets all of the above criteria, then we will seek to substitute the affected reference
asset(s) with another reference asset(s) (selected by us in our sole and absolute
discretion acting in good faith and in a commercially reasonable manner) which
meets the criteria of (i) and (ii) above only.
(iii) has a similar market capitalisation as the affected reference asset.
(ii) belongs to a similar economic sector as the affected reference asset; and
(i)
During the investment period, if any of the following → We will determine in our sole and absolute discretion acting in good faith and in a
extraordinary unforeseeable events occurs in relation to (1)
commercially reasonable manner whether any corresponding adjustment to the
a company issuing the relevant reference share, (2) a
terms of our Basket DCDC ELIs is appropriate to account for the extraordinary
reference share or (3) a reference fund in the basket:
unforeseeable event so as to preserve the economic equivalence of the relevant
Basket DCDC ELIs. If we determine that any such adjustment is appropriate, we
i.
the merging of the company with another company or
will continue our Basket DCDC ELIs and make such adjustment to the terms of our
the acquisition of the company by another entity; or
Basket DCDC ELI. Such adjustments could have an adverse effect on the
market value of your Basket DCDC ELIs.
ii. a tender offer by another entity to purchase the
company.
If we determine (in our sole and absolute discretion acting in good faith and in a
commercially reasonable manner) that any adjustment to the terms of the Basket
DCDC ELIs is not appropriate to account for that event and to preserve the
economic equivalence of the Basket DCDC ELIs, we will seek to substitute the
affected reference asset(s) with another reference asset(s) (selected by us in our sole
and absolute discretion acting in good faith and in a commercially reasonable
manner) which meets the criteria of:
— 95 —
(d)
the insolvency of the company;
the nationalisation of the reference shares;
the delisting of the reference shares on the Hong Kong
Stock Exchange;
a change in law with the result that it becomes illegal for us
to hold or dispose of the reference shares or will cause us
to incur a materially increased cost in performing our
obligations under the Basket DCDC ELIs;
i.
iii.
iii.
iv.
During the investment period, if any of the following →
extraordinary unforeseeable events occurs in relation to (1) a
company issuing the relevant reference share, (2) a reference
share or (3) a reference fund in the basket:
If we determine (in our sole and absolute discretion acting in good faith and in a
commercially reasonable manner) that substitution of the affected reference asset(s) is
appropriate to account for that event, we will continue our Basket DCDC ELIs and make
such substitution as described above and make any further adjustments to the terms of the
Basket DCDC ELIs as we think fit (acting in good faith and in a commercially reasonable
manner) to account for that event, provided that any such substitution and adjustment is not
considered by us to be materially prejudicial to the holders of such Basket DCDC ELIs
generally. Such substitution and adjustment could have an adverse effect on the market
value of the Basket DCDC ELIs.
We will seek to substitute the affected reference asset(s) with another reference asset(s)
(selected by us in our sole and absolute discretion acting in good faith and in a commercially
reasonable manner) based on the same method of selection as stated in sub-paragraph (c)
above.
For further details, please refer to condition 6 of the general terms and conditions of the
Basket DCDC ELIs as set out in Appendix B to this product booklet.
If we determine (in our sole and absolute discretion acting in good faith and in a
commercially reasonable manner) that substitution of the affected reference asset(s) is not
appropriate to account for that event, we will early terminate our Basket DCDC ELIs and
pay you as soon as practicable a fair market value for your Basket DCDC ELIs as of the date
of termination of our Basket DCDC ELIs (determined by us in our sole and absolute
discretion acting in good faith and in a commercially reasonable manner). The fair market
value of the Basket DCDC ELIs will depend on factors such as market interest rate
movements, HSBC’s financial condition, the market’s view of HSBC’s credit quality, the
value of the embedded conditional put option, the price performance and price volatility of
the reference assets in the basket and any accrued potential cash dividend amount. It will
also take into account any cost which is, or would be, incurred by us in unwinding our
hedging arrangements. Depending on the then prevailing market conditions, this fair
market value may be less, or substantially less, than the original amount invested.
— 96 —
the institution of proceedings against or the petition
by the regulator of the company for the company’s
winding-up or liquidation; and
vi.
vii. a fund termination event occurs in relation to the
reference funds.
our inability to hedge our exposure under the Basket
DCDC ELIs or a material increase in the cost of
hedging our exposure under the Basket DCDC ELIs
after the issue date (provided that such an inability or
increase of cost is not incurred because of the
deterioration of our creditworthiness);
v.
For further details, please refer to condition 6 of the general terms and conditions
of the Basket DCDC ELIs as set out in Appendix B to this product booklet.
If we determine (in our sole and absolute discretion acting in good faith and in a
commercially reasonable manner) that substitution of the affected reference asset(s)
is not appropriate to account for that event, we will early terminate our Basket
DCDC ELIs and pay you as soon as practicable a fair market value for your Basket
DCDC ELIs as of the date of termination of our Basket DCDC ELIs (determined
by us in our sole and absolute discretion acting in good faith and in a commercially
reasonable manner). The fair market value of the Basket DCDC ELIs will depend
on factors such as market interest rate movements, HSBC’s financial condition, the
market’s view of HSBC’s credit quality, the value of the embedded conditional put
option, the price performance and price volatility of the reference asset and any
accrued potential cash dividend amount. It will also take into account any cost
which is, or would be, incurred by us in unwinding our hedging arrangements.
Depending on the then prevailing market conditions, this fair market value
may be less, or substantially less, than the original amount invested.
— 97 —
Adjustment to key dates
Since the issue date falls on a date which is the 6th to the 10th business day
following the trade date, any rescheduling of the trade date would effectively lead
to a rescheduling of the issue date, and hence a corresponding rescheduling of the
calculation period start date(s) and end date(s), the expiry date and the settlement
date. In such case, we will inform your distributor, and your distributor will inform
you, as soon as practicable of any such rescheduled dates. Please contact your
distributor for further details.
If the offer period of a series of Basket DCDC ELI → As the trade date is the last day of the offer period, any change in the offer period
changes:
will lead to a corresponding change to the trade date.
Some of the key dates relevant to the terms of the Basket DCDC ELIs may be
adjusted or postponed in certain circumstances.
(b) If any calculation period start date or end date, any call → If any of these dates fall on a day which is not a trading day, it will be postponed
date or the expiry date falls on a day on which the Hong
to the following day on which the Hong Kong Stock Exchange is open for trading.
If any of these days is postponed, the corresponding cash dividend payment date,
Kong Stock Exchange is not scheduled to open for trading:
early settlement date or settlement date will be postponed accordingly. We will not
pay any extra amount for any postponement of the cash dividend payment date, the
early settlement date or the settlement date.
(a)
Will the key dates relevant to the terms of the Basket DCDC
ELIs be adjusted?
B.
— 98 —
(c)
If any of these days is postponed, the corresponding cash dividend payment date,
early settlement date or settlement date will be postponed accordingly. We will not
pay any extra amount for any postponement of the cash dividend payment date, the
early settlement date or the settlement date.
If the trade date, any calculation period end date, any date → If the trade date falls on a disrupted day and the relevant disruption occurs before
your Basket DCDC ELI purchase order has been executed on the trade date, we will
for the determination of “days in” and “days out” as used
cancel your purchase order of the Basket DCDC ELIs on the trade date.
in the variable accrual formula, any knock-in event date (if
applicable), any call date or the expiry date falls on a
However, if the relevant disruption occurs after your Basket DCDC ELI purchase
‘disrupted day’. This would include:
order has been executed on the trade date, your purchase order of the Basket DCDC
ELIs will not be cancelled and the trade date will not be adjusted.
i.
a day on which trading is suspended or disrupted for
a reference asset during the one hour period before
If any of these dates (except for the trade date) falls on a disrupted day, the relevant
the closing time of the Hong Kong Stock Exchange;
date will be postponed to the following trading day which is not a disrupted day (up
or
to a maximum of 8 trading days). If the relevant disruption persists on the 8th
ii. a day on which the Hong Kong Stock Exchange
trading day, we will treat that 8th trading day as the relevant date and we will
closes prior to its scheduled closing time (unless there
estimate in good faith and in a commercially reasonable manner the closing price
is prior announcement by the exchange of such early
of that reference asset on such day by reference to, without limitation, the last
closure).
reported price of that reference asset and prevailing market conditions.
For the purposes of determining “total days”, all of the trading days in a calculation
period will be counted regardless of whether there are any “disrupted days” within
such calculation period.
— 99 —
the settlement date falls on a day which is not a → (a)
“CCASS business day”; or
The affected date will be postponed to the following day which is a “CCASS
business day”. We will not pay any extra amount for any postponement of the
settlement date.
(b) there are settlement disruptions within CCASS → (b) If there are settlement disruptions within CCASS on the settlement date,
on the settlement date:
delivery of the physical settlement amount will be postponed to the following
CCASS business day which is not affected by such settlement disruptions. If
such settlement disruptions persist on the 8th CCASS business day after the
scheduled settlement date, we will seek to deliver the physical settlement
amount as soon as practicable in a commercially reasonable manner outside
CCASS. If we determine in our sole and absolute discretion acting in good
faith and in a commercially reasonable manner that the physical settlement
amount cannot be delivered in any other commercially reasonable manner
outside CCASS, the settlement date will be postponed until delivery can be
effected through CCASS or in any other commercially reasonable manner. For
further details, please refer to the section headed “More information about
delivery of the physical settlement amount” in this product booklet.
(a)
In the case where you have elected for physical
settlement, if:
In the case where you have elected for cash → The affected date will be postponed to the following day which is a “business day”.
We will not pay any extra amount for any postponement of the cash dividend
settlement, if a cash dividend payment date, the early
payment date, the early settlement date or the settlement date.
settlement date or the settlement date falls on a day
which is not a “business day”;
The above table sets out a ready reference of the possible adjustments that we may make to the terms of the Basket DCDC ELIs. If we determine to make
an adjustment to the terms of the Basket DCDC ELIs or substitute the affected reference asset(s) or early terminate the Basket DCDC ELIs, we will notify
the SFC and the distributor(s) as soon as practicable and your distributor will in turn inform you. Any adjustments or substitution or early termination
will be determined by us in our sole and absolute discretion acting in good faith and in a commercially reasonable manner; and such adjustments
or substitution could have an adverse effect on the market value of your Basket DCDC ELIs.
ii.
(d) i.
— 100 —
*
Nominal x Fixed cash dividend rate
amount
If the potential cash dividend amount is a fixed
amount, it will be calculated as follows:
Fixed amount
Autocall condition is satisfied and the
Basket DCDC ELI will be early
terminated on that call date.
Investors receive on the early settlement
date: (i) NOMINAL AMOUNT
(less cash settlement expenses); and
(ii) any accrued POTENTIAL CASH
DIVIDEND AMOUNT calculated up to
(and including) the call date on which the
autocall condition is satisfied.
Yes
Autocall condition is not satisfied and
the Basket DCDC ELI continues to
the next call date; or if autocall
condition is not satisfied on the last
call date, the Basket DCDC ELI
continues to the expiry date (see the
flowchart on the next page) subject
always to early termination due to an
extraordinary unforeseeable event –
see pages 93 to 99 of this product
booklet for further details).
No
C-2(c)
You should note that as the initial spot prices of the reference assets will only be recorded on the trade date, the exercise prices, call prices, floor prices and
(if applicable) knock-in prices that are applicable to the series of Basket DCDC ELI you wish to buy will only be determined on the trade date after you have
purchased the Basket DCDC ELIs. A contract note prepared by your distributor containing all the final commercial terms of the Basket DCDC ELIs you
purchased will be sent to you by your distributor within 2 Hong Kong business days after the trade date. The final term sheet containing all the finalised
commercial terms applicable to your Basket DCDC ELIs will be available for inspection after the relevant issue date. Please contact your distributor for details.
If the potential cash dividend amount is
a variable amount, it will be calculated
according to the variable accrual formula.
For further details on how the variable
accrual formula works, please refer to
page 108 of this product booklet.
Variable amount
Is the closing price of the worst performing asset on a call date AT OR ABOVE
its call price?
Call Date
Autocall Condition
Basket DCDC ELI issued. Your distributor will pay the total issue price for the Basket DCDC ELIs you purchased to us on your behalf
Your purchase order of our Basket DCDC ELIs will be executed on the trade date. All terms finalised; initial spot price of each reference asset in the basket recorded and
exercise price, call price, floor price and (if applicable) knock-in price of each reference asset in the basket determined on the trade date.
Purchase Basket DCDC ELI at the issue price in the settlement currency
Payment of Potential Cash
Cash Dividend
Dividend Amount(s)
Payment Date
The potential cash dividend amount (if any) payable for a calculation period will either
be a variable amount or a fixed amount.
Issue Date
Trade date
plus 6 - 10
business days
Trade Date*
Offer Period*
HOW DO OUR BASKET DCDC ELIS WORK? — A FLOWCHART DESCRIPTION
— 101 —
Yes
(ii) any accrued POTENTIAL CASH
DIVIDEND AMOUNT for the final
calculation period.
(i) NOMINALAMOUNT (less cash settlement
expenses (if any)); and
Investors who have elected for physical settlement will be exposed to the price movement of
the worst performing asset on the expiry date during the period between the expiry date and
the settlement date. If investors choose not to sell such worst performing asset on the settlement
date, they will also be exposed to the market risk of holding such worst performing asset.
Investors suffer a loss under this scenario if the market value of the physical settlement amount
(together with any fractional shares or units of the worst performing asset on the expiry date)
(in both cases calculated based on the closing price of the worst performing asset on the expiry
date) or the cash equivalent of the physical settlement amount, together with any potential
cash dividend amount(s) paid during the scheduled tenor of the Basket DCDC ELIs, is less
than the original amount invested. In an extreme case, you will not receive any potential cash
dividend amount for the entire scheduled tenor and the physical settlement amount or its cash
equivalent could be worth nothing and investors could lose all of their investment.
Investor also receive any accrued POTENTIAL CASH DIVIDEND AMOUNT for the final calculation
period.
(ii) if elected for cash settlement - payment of the CASH EQUIVALENT OF THE PHYSICAL
SETTLEMENT AMOUNT (less any cash settlement expenses).
(i) if elected for physical settlement - physical delivery of a number of the worst performing
asset on the expiry date equal to the PHYSICAL SETTLEMENT AMOUNT (after payment
of physical settlement expenses) and a cash payment for any fractional shares or units of the
worst performing asset on the expiry date.
Investors receive on the settlement date either:
No
Is the closing price of the worst performing asset on the expiry date AT OR ABOVE its exercise price OR call price?
Investors receive on the settlement date:
Expiry Date
If the autocall condition is not satisfied and the Basket DCDC ELIs have not been early terminated, they will terminate on the expiry date.
Where the knock-in event is not applicable:
Settlement Date
(i)
If the autocall condition is not satisfied and the Basket DCDC ELIs have not otherwise been early terminated:
— 102 —
(ii) any accrued POTENTIAL CASH DIVIDEND
AMOUNT for the final calculation period.
(i) NOMINAL AMOUNT (less cash settlement
expenses (if any)); and
Investors receive on the settlement date:
Yes
No
if elected for physical settlement - physical delivery of a number of the worst performing asset on the
expiry date equal to the PHYSICAL SETTLEMENT AMOUNT (after payment of physical settlement
expenses) and a cash payment for any fractional shares or units of the worst performing asset on the expiry
date; or
Yes, an at-expiry knock-in event has
occurred
Investors who have elected for physical settlement will be exposed to the price movement of the worst
performing asset on the expiry date during the period between the expiry date and the settlement date.
If investors choose not to sell such worst performing asset on the settlement date, they will also be exposed
to the market risk of holding such worst performing asset.
Investors suffer a loss under this scenario if the market value of the physical settlement amount (together
with any fractional shares or units of the worst performing asset on the expiry date) (in both cases
calculated based on the closing price of the worst performing asset on the expiry date) or the cash
equivalent of the physical settlement amount, together with any potential cash dividend amount(s) paid
during the scheduled tenor of the Basket DCDC ELIs is less, than the original amount invested. In an
extreme case, you will not receive any potential cash dividend amount for the entire scheduled tenor
and the physical settlement amount or its cash equivalent could be worth nothing and investors could
lose all of their investment.
Investor also receive any accrued POTENTIAL CASH DIVIDEND AMOUNT for the final calculation period.
(ii) if elected for cash settlement - payment of the CASH EQUIVALENT OF THE PHYSICAL SETTLEMENT
AMOUNT (less any cash settlement expenses).
(i)
Investors receive on the settlement date either:
Is the closing price of the worst performing asset on the
expiry date AT OR ABOVE its exercise price OR call price?
Yes, daily knock-in event has
occurred
Is the closing price of the worst performing asset AT OR BELOW its
knock-in price on the expiry date?
Yes, at-expiry knock-in event applicable
Is daily or at-expiry knock-in event applicable?
Is the closing price of the worst performing asset AT OR BELOW
its knock-in price on a knock-in event date as set out in term sheet?
Yes, daily knock-in event applicable
No, daily knock-in event has not occurred
Expiry Date
If the autocall condition is not satisfied and the Basket DCDC ELIs have not been early terminated, they will terminate on the expiry date.
Where the knock-in event is applicable:
Settlement Date
(ii)
No, an at-expiry knock-in
event has not occurred
GLOSSARY — THE MEANING OF THE KEY TERMS OF OUR BASKET DCDC ELIS
The meaning of the key terms of our Basket DCDC ELIs are summarised in the following table. Please note
that we are issuing our Basket DCDC ELIs in series under our Programme and the following terms should
be read as applying to each series separately.
A.
SUBSCRIPTION OF OUR BASKET DCDC ELIS
•
This is the period during which you can buy a Basket DCDC ELI
of a particular series as specified in the relevant term sheet.
•
We may at our sole and absolute discretion change the offer period
without prior notice to your distributor.
•
This is the price you have to pay for a Basket DCDC ELI. Once
your Basket DCDC ELI order is executed on the trade date, your
distributor will pay the total issue price for the Basket DCDC ELIs
you purchased to us on your behalf on the issue date.
•
The issue price for a Basket DCDC ELI is equal to its nominal
amount and will be specified in the relevant term sheet.
•
Distributor(s)’ commissions and other transaction costs including
our cost of hedging are factored into the original issue price of the
Basket DCDC ELIs.
•
This is equivalent to the face value of a Basket DCDC ELI.
•
The nominal amount will be set as an amount equal to the issue
price and will be specified in the relevant term sheet.
•
The nominal amount will be used to calculate: (i) any potential cash
dividend amount; (ii) the early settlement amount; and (iii) the final
settlement payout.
Minimum transfer amount
•
The minimum transfer amount is one Basket DCDC ELI (i.e. the
nominal amount) and is the amount which you can transfer your
Basket DCDC ELIs to a third party. Please refer to condition 1(c)
of the general terms and conditions of the Basket DCDC ELIs as set
out in Appendix B to this product booklet and ask your distributor
for further details.
Trade date
•
This is the last day of the offer period and the date on which your
Basket DCDC ELI purchase order will be executed by us. We will
specify the trade date in the relevant term sheet. You will be subject
to the terms and conditions of the Basket DCDC ELIs from the
trade date.
•
We will record the initial spot price of each reference asset and
determine all the commercial variables (including the exercise
price, the call price, the floor price and (if applicable) the knock-in
price of each reference asset in the basket) of the Basket DCDC ELI
you bought on the trade date.
•
You should note that as all the commercial variables of our Basket
DCDC ELIs are determined on the trade date, you will be subject
to the terms and conditions of our Basket DCDC ELIs from the
trade date and you will be exposed to the market risk and the price
movement of the reference assets in the basket from the trade date
which may affect the market value of the Basket DCDC ELIs.
Offer period
Issue price
Nominal amount
— 103 —
C-2(d)(f)
•
You should note that although all the commercial variables of our
Basket DCDC ELIs are determined on the trade date, our Basket
DCDC ELIs will only be issued on the issue date.
•
Each of the commercial variables in relation to each reference asset
in the basket (including the exercise price, the call price, the floor
price and (if applicable) the knock-in price) and each of the fixed
cash dividend rate, the day-in cash dividend rate and the day-out
cash dividend rate is set by us for each series based on a number of
factors, including:
(i)
the choice of the reference assets in the basket;
(ii)
the expected price volatility of the reference assets in the
basket;
(iii) the prevailing market interest rate;
(iv) the length of the investment period;
(v)
the scheduled tenor of the Basket DCDC ELIs;
(vi) the commercial terms of the Basket DCDC ELIs; and
(vii) the value of the embedded conditional put option.
•
If the trade date falls on a disrupted day and the relevant disruption
occurs before your Basket DCDC ELI purchase order has been
executed on the trade date, we will cancel your purchase order of
the Basket DCDC ELIs on the trade date.
However, if the relevant disruption occurs after your Basket DCDC
ELI purchase order has been executed on the trade date, your
purchase order of the Basket DCDC ELIs will not be cancelled and
the trade date will not be adjusted.
‘Disrupted day’ includes (i) a day on which trading is suspended or
disrupted for a reference asset during the one hour period before the
closing time of the Hong Kong Stock Exchange (HKSE); or (ii) a
day on which the HKSE closes prior to its scheduled closing time
(unless there is prior announcement by the exchange of such early
closure).
Settlement currency
•
This is the currency in which our Basket DCDC ELIs are
denominated and will be specified in the relevant term sheet. The
Basket DCDC ELIs will be denominated in Hong Kong dollars,
United States dollars or other non-restricted and freely convertible
currencies. You will pay the issue price and, where applicable,
receive any cash amount payable to you under our Basket DCDC
ELIs in the settlement currency.
•
If the settlement currency of the Basket DCDC ELIs is different
from Hong Kong dollars (being the currency in which the reference
assets trade), we will convert one currency into another at the
exchange rate as specified in the relevant term sheet in making
calculations under the Basket DCDC ELIs (if applicable).
— 104 —
Exchange rate
•
This is the mid-market exchange rate for Hong Kong dollars per 1
settlement currency on the expiry date as specified in the relevant
term sheet.
Basket of reference assets
•
Each series of Basket DCDC ELIs is linked to a basket of reference
assets (shares of companies and/or units of funds, being real estate
investment trusts and/or exchange traded funds) listed on the HKSE
and quoted in Hong Kong dollars.
C-9
•
Information on such company or fund (including its published
audited consolidated financial statements and interim financial
statements (if any)) may be obtained from the website operated by
the HKSE at www.hkexnews.hk.
C-10(a)
•
The basket may comprise a minimum of two and a maximum of six
reference assets. The reference assets will be specified in the
relevant term sheet. Not all Hong Kong-listed shares or funds can
be used as a reference asset for our Basket DCDC ELIs ⳮ please
ask your distributor what reference assets are available.
•
We will record an initial spot price for each reference asset in the
basket. The initial spot price of a reference asset is either (i) the
closing price of that reference asset on the trade date or (ii) the
prevailing market price of that reference asset as quoted by the
HKSE at the time your Basket DCDC ELI purchase order is
executed on the trade date.
•
The initial spot price for each reference asset will be specified in
the relevant final term sheet and we will calculate the exercise price
by reference to the initial spot price.
•
When we refer to the closing price of a reference asset on a
particular day, we mean the closing price of that reference asset as
quoted by the Hong Kong Stock Exchange on that day.
•
However, when we refer to the closing price of a reference asset on
a particular day (except the trade date) but such day falls on a
‘disrupted day’, such day will be postponed to the following trading
day which is not a ‘disrupted day’ (up to a maximum of 8 trading
days). If the relevant disruption persists on the 8th trading day, we
will treat that 8th trading day as the relevant date and we will
estimate in good faith and in a commercially reasonable manner the
closing price of such reference asset on such day by reference to,
without limitation, the last reported price of such reference asset
and prevailing market conditions.
•
This is the date our Basket DCDC ELIs are issued and the date on
which your distributor will pay the aggregate issue price for the
Basket DCDC ELI(s) you buy to us on your behalf.
•
The issue date is a day falling 6 to 10 business days after the trade
date and will be specified in the relevant term sheet.
•
This is the period from and including the issue date to and including
the settlement date and is the duration for which you have to hold
a Basket DCDC ELI before it is settled. The scheduled tenor of the
Basket DCDC ELIs normally ranges from one month to two years
and will be specified in the relevant term sheet.
Initial spot price
Closing price
Issue date
Scheduled tenor of the Basket
DCDC ELIs
— 105 —
Investment period
•
This is the duration between the date on which all the commercial
variables of the Basket DCDC ELI you wish to purchase are
determined and the date on which the final settlement payout is
determined, i.e. the period from and including the trade date to and
including the expiry date.
Order date
•
This is the day you place your Basket DCDC ELI purchase order to
your distributor. Please contact your distributor for details on when
you have to deposit the aggregate issue price to the cash account
that you hold with your distributor and the distributor’s usual
settlement procedures.
•
Depending on when you decide to place your Basket DCDC ELI
purchase order to your distributor, the order date may fall on or
before the trade date and will fall before the issue date.
•
This is the period from (and including) the order date to (and
including) the 5th Hong Kong business day after the order date
during which you have the right to cancel or unwind your Basket
DCDC ELI purchase order.
•
Please refer to the section headed “Is there a post-sale cooling-off
period for our Basket DCDC ELIs?” in this product booklet for
further details.
•
If you choose to cancel or unwind your Basket DCDC ELI purchase
order during the post-sale cooling off period, we will pay you
(through your distributor) a cash amount determined in accordance
with the formula set out below:
Post-sale cooling-off period
(I)
Issue price
MINUS
(II)
any market value adjustments (the value of which will be
determined by us in good faith and in a commercially
reasonable manner and will depend on factors such as market
interest rate movements, HSBC’s financial condition, the
market’s view of HSBC’s credit quality, the value of the
embedded conditional put option and the price performance
and price volatility of the reference assets in the basket). Our
transaction costs (if any), including any cost which has been
incurred by us in unwinding the hedging arrangements
relating to the relevant Basket DCDC ELI will also be
included in the calculation of the market value adjustments.
(Please note that there will be no market value adjustment
if you submit your instructions to cancel your Basket
DCDC ELI purchase order to your distributor before the
trade date).
•
The cash amount returned to you will be capped at the issue price
of your Basket DCDC ELIs.
•
The cash amount returned to you may be substantially less than
the original amount invested
— 106 —
•
If you exercise your right to cancel or unwind your Basket DCDC
ELI purchase order during the post-sale cooling-off period, the cash
amount returned to you will not be reduced by any commission paid
by us to your distributor. However, your distributor may charge you
a handling fee for the cancellation or unwinding of your Basket
DCDC ELI purchase order. Please refer to “Distributor’s charges”
below.
•
You can only choose to unwind or cancel the whole (and not part)
of your purchase order of Basket DCDC ELIs.
Please refer to the section headed “Is there a post-sale cooling-off
period for our Basket DCDC ELIs?” in this product booklet for
further details.
•
The market making days applicable to your Basket DCDC ELIs
will be the days falling every other Tuesday after the issue date up
to the 3rd Hong Kong business day before the expiry date, or if any
such market making day is neither a Hong Kong business day nor
a trading day, that market making day will be postponed to the next
Hong Kong business day on which the HKSE is open for trading.
•
Please refer to the section headed “Is there any market making
arrangements for your Basket DCDC ELIs before their expiry?” in
this product booklet for further details.
CCASS business day
•
A day on which the CCASS is open.
Business day
•
A day (other than Saturdays and Sundays) on which banks and
foreign exchange markets are open for business in Hong Kong and
the major currency business centre(s) of the settlement currency.
Trading day
•
A day on which the HKSE is scheduled to open for trading.
Market making day
B.
PAYMENT OF POTENTIAL CASH DIVIDEND AMOUNT(S)
Potential cash dividend
amount(s)
•
The potential cash dividend amount(s) are periodic cash payments
that you may receive for a calculation period.
•
The relevant term sheet will specify whether the potential cash
dividend amount for a calculation period is:
(i)
a variable amount calculated according to the variable accrual
formula (see “Variable potential cash dividend amount”
below); or
(ii)
a fixed amount (see “Fixed potential cash dividend amount”
below).
•
If a potential cash dividend amount is payable for a calculation
period, it will be paid on the relevant cash dividend payment date
(see “Cash dividend payment date” below).
•
We will specify the frequency of payment of any potential cash
dividend amount(s) in the relevant term sheet.
You should note that it is possible that you will not receive any
potential cash dividend amount for the entire scheduled tenor
of the Basket DCDC ELIs.
— 107 —
Variable potential cash
dividend amount
•
If the potential cash dividend amount for a calculation period is
specified as being a variable amount, we will determine whether
such variable potential cash dividend amount is payable by
reference to the price performance of the worst performing asset in
the basket. The variable potential cash dividend amount will be
calculated according to the variable accrual formula as set out
below:
(I) Nominal amount x Day-in cash dividend rate x
C-9
Days in
Total days
PLUS
(II) Nominal amount x Day-out cash dividend rate x
Days out
Total days
The day-in cash dividend rate and day-out cash dividend rate used
in the variable accrual formula will be specified in the relevant term
sheet. The day-out cash dividend rate can be set as zero.
Fixed potential cash dividend
amount
•
If the Basket DCDC ELI is terminated on a call date (see “Autocall
condition” below), the variable potential cash dividend amount for
the relevant calculation period will be calculated based on the
number of trading days from (but excluding) the relevant
calculation period start date up to (and including) the call date on
which the autocall condition is satisfied. (See also “Days in” and
“Days out” below)
•
If the potential cash dividend amount for a calculation period is
specified as being a fixed amount, such fixed potential cash
dividend amount is payable regardless of the price performance of
the reference assets in the basket. The fixed potential cash dividend
amount will be calculated as follows:
Nominal amount
x
Fixed cash dividend rate
The fixed cash dividend rate will be specified in the relevant term
sheet.
•
If the Basket DCDC ELI is terminated on a call date (see “Autocall
condition” below), the fixed potential cash dividend amount for the
relevant calculation period will be calculated on a pro-rata basis as
follows:
Nominal
amount
x
Fixed cash
dividend rate
x
No. of days*
Total days
* “No. of days” means the number of trading days from (but
excluding) the relevant calculation period start date up to (and
including) the call date on which the autocall condition is satisfied.
Calculation period
•
This is the period during which the potential cash dividend amount
for our Basket DCDC ELIs will be accrued.
•
A calculation period starts on (but excludes) a calculation period
start date and ends on (and includes) a calculation period end date.
The calculation period start dates and calculation period end dates
will be set out in the relevant term sheet.
— 108 —
C-9
Cash dividend payment date
•
Each date falling on the 3rd business day after a calculation period
end date, as specified in the relevant term sheet. If the Basket
DCDC ELI is terminated on a call date (see “Autocall condition”
below) any accrued potential cash dividend amount will be paid on
the early settlement date.
Days in
•
The total number of trading days in a calculation period on which
the closing price of the worst performing asset (which will be
determined by us on each trading day based on the closing price of
each reference asset in the basket) is at or above its floor price.
•
If the Basket DCDC ELI is terminated on a call date (see “Autocall
condition” below), the number of ‘days in’ for the relevant
calculation period will be calculated up to (and including) the call
date on which the autocall condition is satisfied.
•
The total number of trading days in the calculation period on which
the closing price of the worst performing asset (which will be
determined on each trading day based on the closing price of each
reference asset in the basket) is below its floor price.
•
If the Basket DCDC ELI is terminated on a call date (see “Autocall
condition” below), the number of ‘days out’ for the relevant
calculation period will be calculated up to (and including) the call
date on which the autocall condition is satisfied.
•
We will determine which reference asset in the basket is the “worst
performing asset” for each relevant trading day on which the prices
of the reference assets are required to be observed.
•
The reference asset with the lowest “performance” on a trading day
will be the worst performing asset for that trading day. The worst
performing asset on each trading day can be different.
•
If more than one reference asset in the basket have the same lowest
“performance” on a particular trading day, we will decide in our
sole and absolute discretion acting in good faith and in a
commercially reasonable manner which reference asset will be the
worst performing asset for that trading day.
•
The performance of a reference asset on a trading day is calculated
as follows:
Days out
Worst performing asset
Performance
Closing price of the
reference asset on a trading day
Performance
=
x 100%
Initial spot price of
the reference asset
Total days
•
The total number of trading days in a calculation period, regardless
of whether the autocall condition is satisfied on any trading day
during a calculation period and regardless of whether there are any
“disrupted days” within such calculation period.
— 109 —
C-4(a)
•
We will stipulate a floor price for each reference asset in the basket.
The floor price of each reference asset is set at a specified
percentage of its initial spot price and will be set out in the relevant
term sheet. The specified percentage used to calculate the floor
price of each reference asset for each relevant trading day will be
the same. The floor price will be rounded up to the nearest 4
decimal places.
•
The floor price is the price level we will look at in determining
whether a particular trading day in a calculation period is a “days
in” and “days out” for the purpose of the variable accrual formula.
•
There are two variations of autocall condition: (i) daily autocall
condition; and (ii) periodic autocall condition (see also “Call date”
below). We will specify in the relevant term sheet which type of
autocall condition applies to your Basket DCDC ELIs.
•
The autocall condition is satisfied if the closing price of the worst
performing asset is at or above its call price on a call date,
regardless of whether a knock-in event (if applicable) has occurred.
•
If the relevant autocall condition is satisfied on a call date, the
Basket DCDC ELIs will be terminated and you will receive the
early settlement amount on the early settlement date, regardless of
whether a knock-in event (if applicable) has occurred.
Early settlement amount
•
If the autocall condition is satisfied, the Basket DCDC ELIs will be
terminated on the relevant call date and you will receive the
nominal amount and any accrued potential cash dividend amount
calculated up to (and including) the call date, less cash settlement
expenses (if such expenses are payable) on the early settlement
date.
Early settlement date
•
This is the date on which you will receive the early settlement
amount (see “Early settlement amount” above) if the autocall
condition is satisfied.
•
A date falling on the 3rd business day after the call date on which
the autocall condition is satisfied, as specified in the relevant term
sheet.
•
We will stipulate a call price for each reference asset in the basket.
The call price of each reference asset is set at a specified percentage
of its initial spot price and will be set out in the relevant term sheet.
The specified percentage used to calculate the call price of each
reference asset on each call date will be the same. The call price
will be rounded up to the nearest 4 decimal places.
•
The call price is the price level we will look at in determining (i)
whether the autocall condition is satisfied on a call date and (ii) if
the autocall condition is not satisfied, the payout of the Basket
DCDC ELIs at expiry (see “Final settlement payout” below). The
call price may be set at a level which is higher than, equal to or
lower than the exercise price. The call price will be set at the same
level for all of the above purposes.
Floor price
C.
AUTOCALL CONDITION
Autocall condition
Call price
— 110 —
C-4(a)
Call date
D.
•
If the daily autocall condition applies, the call date(s) will be set as
each trading day (excluding the expiry date) during a relevant
period as set out in the relevant term sheet. If the periodic autocall
condition applies, the call date(s) will be set as certain calculation
period end dates (excluding the expiry date) as set out in the
relevant term sheet.
•
This is the date on which our Basket DCDC ELIs are terminated if
the relevant autocall condition is satisfied.
•
We will observe the closing price of the worst performing asset on
each call date and compare it against its call price to determine
whether the autocall condition is satisfied.
AT EXPIRY OF OUR BASKET DCDC ELIs
Expiry date
Exercise price
•
If the autocall condition is not satisfied and our Basket DCDC ELIs
are not early terminated due to an extraordinary unforeseeable
event (see pages 93 to 99 of this product booklet for further details),
our Basket DCDC ELIs will terminate on the expiry date as
specified in the relevant term sheet.
•
You should note that although the final settlement payout will be
determined on the expiry date, the final settlement payout will only
be paid or delivered to you on the settlement date.
•
We will stipulate an exercise price for each reference asset in the
basket. The exercise price of each reference asset may be expressed
as a specified percentage of its initial spot price or in a range of
percentages of its initial spot price (such range will be no wider
than Ⳳ2.5%) in the relevant term sheet. The specified percentage
(or if applicable, range of percentages) used to calculate the
exercise price of each reference asset will be the same. The exercise
price will be rounded up to the nearest 4 decimal places.
•
If the exercise price is expressed in a range in the term sheet, the
actual exercise price will be determined by us on the trade date in
good faith and in a commercially reasonable manner depending on
prevailing market conditions (including the price volatility of the
reference assets and the prevailing market interest rate) in order to
maintain the other terms of the Basket DCDC ELIs (including the
fixed cash dividend rate, the day-in cash dividend rate, the day-out
cash dividend rate, the call price, the floor price and (if applicable)
the knock-in price) given any change in the parameters used in the
determination of such terms during the period between the
commencement of the offer period and the trade date.
•
The final exercise price will be set out in the contract note prepared
by your distributor (which will be sent to you by your distributor
within 2 Hong Kong business days after the trade date) and in the
relevant final term sheet and pricing supplement.
•
The exercise price can be viewed as one of the benchmarks against
which the closing price of the worst performing asset on the expiry
date will be compared to determine the final settlement payout of
the Basket DCDC ELIs at expiry if (i) a knock-in event is not
applicable, or (ii) if a daily knock-in event is applicable and such
event has occurred.
— 111 —
•
The relevant term sheet will specify whether a knock-in event
applies to a series of Basket DCDC ELIs. If a knock-in event is
applicable, the payout of the Basket DCDC ELIs at expiry will
depend on whether the relevant knock-in event has occurred.
•
There are two variations of knock-in event: (i) daily knock-in event
and (ii) at-expiry knock-in event (see also “Knock-in event date”
below). If applicable, we will specify in the relevant term sheet
which type of knock-in event applies to your Basket DCDC ELIs.
•
A “knock-in event” occurs if the closing price of the worst
performing asset is at or below its knock-in price on any knock-in
event date(s).
•
If a knock-in event is applicable, we will stipulate a knock-in price
for each reference asset in the basket. The knock-in price of each
reference asset is set at a specified percentage of its initial spot
price and will be set out in the relevant term sheet. The specified
percentage used to calculate the knock-in price of each reference
asset for each knock-in event date will be the same. The knock-in
price of each reference asset will always be set at a level which is
lower than its exercise price and its call price. The knock-in price
will be rounded up to the nearest 4 decimal places.
•
If a knock-in event is applicable, we will observe the closing price
of the worst performing asset on each knock-in event date and
compare it against its knock-in price to determine whether a
knock-in event has occurred. If a daily knock-in event applies, the
reference asset which triggers a knock-in event on a knock-in event
date may or may not be the same reference asset which is the worst
performing asset on the expiry date.
Knock-in event date
•
If the daily knock-in event applies, the knock-in event date(s) will
be set as each trading day during a relevant period as specified in
the relevant term sheet. If the at-expiry knock-in event applies, the
knock-in event date will be set as the expiry date.
Final settlement payout
(for each Basket DCDC
ELI)
(A) For our Basket DCDC ELIs where the knock-in event is not
applicable:
Knock-in event
Knock-in price
If the Basket DCDC ELIs have not been early terminated pursuant
to the autocall condition or upon the occurrence of an extraordinary
unforeseeable event and:
(i)
If the closing price of the worst performing asset on the
expiry date is at or above its exercise price or its call price,
you will receive on the settlement date the nominal amount
and any accrued potential cash dividend amount for the final
calculation period less any cash settlement expenses
(currently, no cash settlement expenses are payable).
— 112 —
C-9
C-2(i)
(ii)
(B)
If the closing price of the worst performing asset on the
expiry date is below its exercise price and its call price, you
will receive on the settlement date any accrued potential cash
dividend amount for the final calculation period plus either:
(x)
if you have elected for physical settlement — physical
delivery of a number of the worst performing asset on
the expiry date equal to the physical settlement amount
(after payment of all physical settlement expenses) and
a cash payment for any fractional shares or units of the
worst performing asset on the expiry date (please see
“Fractional shares or units” below). No cash settlement
expenses will be payable for the cash payment of such
fractional shares or units; or
(y)
if you have elected for cash settlement — payment of a
cash amount equal to the cash equivalent of the physical
settlement amount less any cash settlement expenses
(currently, no cash settlement expenses are payable).
For our Basket DCDC ELIs where the daily knock-in event is
applicable:
If the Basket DCDC ELIs have not been early terminated pursuant
to the autocall condition or upon the occurrence of an extraordinary
unforeseeable event and:
(i)
If:
(a)
a daily knock-in event has not occurred; or
(b)
a daily knock-in event has occurred but the closing
price of the worst performing asset on the expiry date is
at or above its exercise price or its call price,
you will receive on the settlement date the nominal amount
and any accrued potential cash dividend amount for the final
calculation period less any cash settlement expenses
(currently no cash settlement expenses are payable).
(ii)
If a daily knock-in event has occurred AND the closing price
of the worst performing asset on the expiry date is below its
exercise price and its call price, you will receive on the
settlement date any accrued potential cash dividend amount
for the final calculation period plus either:
(x)
if you have elected for physical settlement — physical
delivery of a number of the worst performing asset on
the expiry date equal to the physical settlement amount
(after payment of all physical settlement expenses) and
a cash payment for any fractional shares or units of the
worst performing asset on the expiry date (please see
“Fractional shares or units” below). No cash settlement
expenses will be payable for the cash payment of such
fractional shares or units; or
(y)
if you have elected for cash settlement — payment of a
cash amount equal to the cash equivalent of the physical
settlement amount less any cash settlement expenses
(currently no cash settlement expenses are payable).
— 113 —
(C)
For our Basket DCDC ELIs where the at-expiry knock-in event is
applicable:
If the Basket DCDC ELIs have not been early terminated pursuant
to the autocall condition or upon the occurrence of an extraordinary
unforeseeable event and:
(i)
If an at-expiry knock-in event has not occurred,
you will receive on the settlement date the nominal amount
and any accrued potential cash dividend amount for the final
calculation period less any cash settlement expenses
(currently, no cash settlement expenses are payable).
(ii)
If an at-expiry knock-in event has occurred, you will receive
on the settlement date any accrued potential cash dividend
amount for the final calculation period plus either:
(x)
if you have elected for physical settlement — physical
delivery of a number of the worst performing asset
equal to the physical settlement amount (after payment
of all physical settlement expenses) and a cash payment
for any fractional shares or units of the worst
performing asset on the expiry date (please see
“Fractional shares or units” below). No cash settlement
expenses will be payable for the cash payment of such
fractional shares or units; or
(y)
if you have elected for cash settlement — payment of a
cash amount equal to the cash equivalent of the physical
settlement amount less any cash settlement expenses
(currently, no cash settlement expenses are payable).
You should note that your final settlement payout under the Basket
DCDC ELIs will be reduced by any distributor’s charges and any
cash settlement expenses or physical settlement expenses payable
on settlement of the Basket DCDC ELIs.
You should note that if (x) or (y) under (A), (B) or (C) above
occurs, you will suffer a loss if the market value of the physical
settlement amount (together with any fractional shares or units
of the worst performing asset on the expiry date) (in both cases
calculated based on the closing price of the worst performing
asset on the expiry date) or the cash equivalent of the physical
settlement amount, together with any potential cash dividend
amount(s) paid during the scheduled tenor of the Basket DCDC
ELIs, is less than your original amount invested. In an extreme
case, you will not receive any potential cash dividend amount
for the entire scheduled tenor and the physical settlement
amount or its cash equivalent could be worth nothing and you
could lose all of your investment.
If you elect for physical settlement, the physical settlement amount
will only be delivered to you on the settlement date. Therefore, you
will be exposed to any movement in the market price of the worst
performing asset on the expiry date during the period between the
expiry date and the settlement date, which will be a period of 3
business days. If you choose not to sell such worst performing asset
on the settlement date, you will also be exposed to the market risk
of holding such worst performing asset.
— 114 —
Physical settlement amount
•
The physical settlement amount is the number of shares or units of
the worst performing asset on the expiry date (after payment of all
physical settlement expenses) which we will deliver to you on the
settlement date of the Basket DCDC ELIs if certain conditions have
been met:
•
For our Basket DCDC ELIs where the knock-in event is not
applicable:
If the closing price of the worst performing asset on the
expiry date is below its exercise price and its call price and
you have elected for physical settlement (see “Mode of
settlement at expiry” below).
•
For our Basket DCDC ELIs where the daily knock-in event is
applicable:
If a daily knock-in event has occurred AND the closing
price of the worst performing asset on the expiry date is
below its exercise price and its call price and you have
elected for physical settlement (see “Mode of settlement at
expiry” below).
•
For our Basket DCDC ELIs where the at-expiry knock-in
event is applicable:
If an at-expiry knock-in event has occurred and you have
elected for physical settlement (see “Mode of settlement at
expiry” below).
•
The physical settlement amount for each Basket DCDC ELI is
calculated as follows (rounded down to the nearest whole number
of shares or units of the worst performing asset on the expiry date):
Nominal amount
(converted into Hong Kong dollars at the exchange rate as
specified in the relevant term sheet where necessary)
Exercise price of the worst performing asset on the expiry date
You should note that any odd lot(s) of such worst performing asset
will also be delivered to you.
Any fractional shares or units of the worst performing asset on the
expiry date will not be delivered to you as part of the physical
settlement amount (see “Fractional shares or units”) below.
•
We will calculate the number of shares or fund units of the worst
performing asset which form the physical settlement amount on a
per-Basket DCDC ELI basis.
•
Please refer to the section headed “More information about delivery
of the physical settlement amount” in this product booklet for
further details.
— 115 —
C-2(i)
C-4(b)
Fractional shares or units
Cash equivalent of the
physical settlement amount
•
Any fractional shares or units of the worst performing asset on the
expiry date (rounded up to the nearest 4 decimal places) will be
settled by payment of a cash amount in the settlement currency
calculated based on the closing price of the worst performing asset
on the expiry date and the prevailing exchange rate as specified in
the relevant term sheet (if applicable) on the expiry date. No cash
settlement expenses will be payable for the cash payment of any
fractional shares or units of the worst performing asset to you.
•
Please refer to the section headed “More information about delivery
of the physical settlement amount” in this product booklet for
further details.
•
The cash equivalent of the physical settlement amount is calculated
as follows (rounded to 2 decimal places, with $0.005 rounded
upwards):
Nominal amount
Exercise price of
the worst performing asset
on the expiry date
x
Closing price of the
worst performing
asset on the expiry date
•
We will pay you the cash equivalent of the physical settlement
amount (less any cash settlement expenses) on the settlement date
if certain conditions have been met.
•
For our Basket DCDC ELIs where the knock-in event is not
applicable:
If the closing price of the worst performing asset on the expiry date
is below its exercise price and its call price and you have elected
for cash settlement (see “Mode of settlement at expiry” below).
•
For our Basket DCDC ELIs where the daily knock-in event is
applicable:
If a daily knock-in event has occurred AND the closing price of
the worst performing asset on the expiry date is below its exercise
price and its call price and you have elected for cash settlement (see
“Mode of settlement at expiry” below).
•
For our Basket DCDC ELIs where the at-expiry knock-in event is
applicable:
If an at-expiry knock-in event has occurred and you have elected
for cash settlement (see “Mode of Settlement at expiry” below).
•
We will calculate the cash equivalent of the physical settlement
amount on a per-Basket DCDC ELI basis.
— 116 —
C-2(i)
C-4(b)
Mode of settlement at expiry
Settlement date
Cash settlement expenses
Physical settlement expenses
•
When you apply for the Basket DCDC ELIs, you will be required
to specify on the subscription form whether you elect for cash
settlement or physical settlement upon expiry of our Basket DCDC
ELIs in the case where (i) the knock-in event is not applicable and
the closing price of the worst performing asset on the expiry date
is below its exercise price and its call price; or (ii) a daily knock-in
event is applicable and a daily knock-in event has occurred and the
closing price of the worst performing asset on the expiry date is
below its exercise price and its call price; or (iii) an at-expiry
knock-in event is applicable and an at-expiry knock-in event has
occurred.
•
You can change your election at any time but no later than
4:00 p.m. (Hong Kong time) on the 3rd Hong Kong business day
prior to the expiry date by contacting your distributor.
•
This is the date on which you will receive the final settlement
payout (see also “Final settlement payout” above) upon expiry of
the Basket DCDC ELIs if the autocall condition has not been
satisfied and the Basket DCDC ELIs have not been early
terminated.
•
A date falling 3 business days after the expiry date, as specified in
the relevant term sheet.
•
If a settlement amount in cash (including the early settlement
amount, the nominal amount or the cash equivalent of the physical
settlement amount (as the case may be)) is payable, you will have
to pay for all cash settlement expenses. No cash settlement
expenses will be payable for the cash payment of any fractional
shares or units of the worst performing asset on the expiry date to
you.
•
Cash settlement expenses are all charges or expenses, including any
taxes and duties that are incurred by us in connection with making
the payment of the relevant settlement amount in cash to you.
Currently there are no such charges or expenses.
•
If any cash settlement expenses are payable in the future, we will
inform the distributor(s) as soon as practicable and your distributor
will in turn inform you in advance.
•
Before the physical settlement amount is delivered to you on the
settlement date, you will have to pay for all physical settlement
expenses.
•
Physical settlement expenses are out-of-pocket expenses relating to
the transfer and receipt of the physical settlement amount including
buyer’s stamp duty chargeable on the transfer of the physical
settlement amount pursuant to the Stamp Duty Ordinance Cap. 117,
Laws of Hong Kong (at the current rate of 0.1% of the value of
consideration paid), calculated based on the closing price of the
worst performing asset on the expiry date, transaction levies,
registration charges and any other charges levied by the distributor
in connection with the provision of custodial, transfer and clearing
services.
— 117 —
C-4(a)(b)
C-4(a)
You can find information about buyers’ stamp duty on the purchase
of Hong Kong stocks on the website of the Inland Revenue
Department at http://www.ird.gov.hk. If in doubt, please seek
independent professional advice (including tax advice).
Distributor’s charges
•
Please contact your distributor for details.
•
Any fractional shares or units of the worst performing asset on the
expiry date will be settled by a cash payment and no physical
settlement expenses will be payable for such fractional shares or
units.
•
You should check with your distributor how much they charge if
you buy Basket DCDC ELIs from them; if you cancel or unwind
your order for the purchase of the Basket DCDC ELIs; or if you sell
your Basket DCDC ELIs back to us on a market making day (where
applicable).
NOTES
1.
This is a summary of the meaning of the key terms of our Basket DCDC ELIs. You should read all of
this product booklet and the relevant indicative term sheet, as well as our programme memorandum
(together with any addendum to the programme memorandum or this product booklet as specified in
the relevant term sheet) before deciding whether or not to buy any of our Basket DCDC ELIs.
2.
Some of the terms which we have used in this summary could be subject to change as provided in the
legal documentation. We have prepared a summary table on pages 93 to 99 of this product booklet to
give you a ready reference of the possible adjustments that we may make to the terms and conditions
of our Basket DCDC ELIs (including adjustments to the terms of the Basket DCDC ELIs due to
extraordinary unforeseeable events and adjustments to the key dates due to market disruption events).
You should also refer to the general terms and conditions of the Basket DCDC ELIs (in particular,
condition 6) as set out in Appendix B to this product booklet for more details.
3.
For further details on the effects of a settlement disruption event affecting physical delivery of the
physical settlement amount, please refer to the section headed “More Information about delivery of the
physical settlement amount” in this product booklet.
4.
We will make all determinations, and exercise all discretion, under the terms and conditions of our
Basket DCDC ELIs. We have the sole and absolute discretion in making all determinations and
exercising all discretion under the legal documentation. Any decision we make will be made in good
faith and in a commercially reasonable manner and is final and binding on you and on us and any other
parties involved in our Basket DCDC ELIs.
— 118 —
C-4(b)
MORE INFORMATION ABOUT DELIVERY OF THE PHYSICAL
SETTLEMENT AMOUNT
When will the physical settlement amount be delivered?
•
If physical settlement amount is deliverable to you, we will make a cash payment equal to the cash
equivalent of the physical settlement amount due under our Basket DCDC ELIs to the legal holder of
our Basket DCDC ELIs, being the nominee of Euroclear and/or Clearstream, Luxembourg (if the
relevant clearing system is Euroclear and/or Clearsteam, Luxembourg) or HKSCC Nominee Limited,
being the nominee of CCASS (if the relevant clearing system is CCASS). Pursuant to the physical
settlement option as set out under condition 2(c) of the general terms and conditions of the Basket
DCDC ELIs as set out in Appendix B to this product booklet, the legal holder of our Basket DCDC ELIs
has appointed us (as issuer), or our agent, to use the cash equivalent of the physical settlement amount
to purchase (on behalf of the legal holder of our Basket DCDC ELIs) the worst performing asset which
forms the physical settlement amount and deliver the physical settlement amount to the legal holder of
our Basket DCDC ELIs via CCASS. The legal holder will then instruct CCASS to deliver the same to
your distributor (directly or indirectly via its custodian) by way of electronic settlement through
CCASS. You will have to rely (i) on CCASS to credit the accounts of your distributor (or its custodian)
with the physical settlement amount and (ii) on your distributor to ensure that the physical settlement
amount is credited through to your account with your distributor.
•
If physical settlement amount is deliverable to you, your distributor will deposit the physical settlement
amount into your investment account on the settlement date provided that you have paid all physical
settlement expenses, including buyer’s stamp duty, transaction levies, registration charges and any
other costs and expenses incurred in connection with the transfer and receipt of the physical settlement
amount. Your distributor may also charge you a fee for depositing the physical settlement amount into
your investment account and the provision of other securities services. Please ask your distributor for
further details.
•
Scheduled dates for the delivery of shares or fund units must be days on which CCASS is open.
•
Upon the occurrence of an event beyond our control which we, in our sole and absolute discretion
acting in good faith and in a commercially reasonable manner, determine that it is not practicable to
deliver the physical settlement amount to the legal holder of the Basket DCDC ELIs and your
distributor or its custodian (which are registered as accountholders or participants of the Basket DCDC
ELIs in the clearing systems entitled to receive the physical settlement amount) via CCASS (such event
is referred to as a “settlement disruption event” in this product booklet), delivery of the physical
settlement amount to the legal holder of our Basket DCDC ELIs and your distributor or its custodian
will be postponed to the following CCASS business day which is not affected by such settlement
disruptions. If such settlement disruption event persists on the 8th CCASS business day after the
scheduled settlement date, we will seek to deliver the physical settlement amount to the legal holder
of the Basket DCDC ELIs (who will in turn arrange to deliver the same to your distributor or its
custodian) as soon as practicable in a commercially reasonable manner outside CCASS. If we determine
in our sole and absolute discretion acting in good faith and in a commercially reasonable manner that
the physical settlement amount cannot be delivered in any other commercially reasonable manner
outside CCASS, the settlement date will be postponed until delivery can be effected through CCASS
or in any other commercially reasonable manner.
•
We will notify your distributor on the scheduled settlement date of any postponement of the settlement
date. We will also notify your distributor on such 8th CCASS business day following the scheduled
settlement date whether we are able to deliver the physical settlement amount to you in a commercially
reasonable manner outside CCASS or whether the delivery of the physical settlement amount will be
postponed indefinitely until delivery in a commercially reasonable manner is possible. Your distributor
will in turn inform you. There is no assurance of the duration of such a delay. Where such a delay
occurs, movements in the market price of the worst performing asset on the expiry date could affect the
market value of the physical settlement amount delivered on the postponed settlement date. We will not
pay any extra amount for any delay in delivery of the physical settlement amount.
— 119 —
C-4(a)(b)
C-5
•
This is a summary of the provisions relating to physical delivery of the physical settlement amount. For
further details, please refer to condition 4(f) of the general terms and conditions of the Basket DCDC
ELIs as set out in Appendix B to this product booklet and the relevant pricing supplement.
What if odd lot(s) of the worst performing asset on the expiry date are deliverable?
•
We will deliver any odd lot(s) of the worst performing asset on the expiry date to you as part of the
physical settlement amount.
•
Where the physical settlement amount consists of an odd lot, you should note that the market price of
the odd lot may be lower than the whole board lot, and you may have difficulty selling such odd lot
in the market.
What about fractional shares or units of the worst performing asset on the expiry date?
•
We will not deliver any fractional shares or units of the worst performing asset on the expiry date to
you but instead will pay you a cash equivalent for that fractional shares or units in the settlement
currency. No cash settlement expenses will be payable for the cash payment of any fractional shares or
units of such worst performing asset to you.
•
This cash equivalent for the fractional share or unit is calculated as follows (rounded to 2 decimal
places, with $0.005 or above rounded upwards):
Fractional shares or
fund units (rounded to
the nearest
4 decimal places,
x
with 0.00005 or
above rounded
upwards)
•
closing price of the worst performing asset on the expiry date
(converted into the settlement currency where necessary)
The physical settlement amount will be calculated on a per- Basket DCDC ELI basis and not on the
basis of the aggregate number of Basket DCDC ELIs you hold.
— 120 —
MORE INFORMATION ABOUT OUR BASKET DCDC ELIS
WHAT IS INCLUDED IN OUR ELI DOCUMENTATION?
Basket DCDC ELI offering documents
The following documents constitute the offering documents of our Basket DCDC ELIs. You should read all
of these documents (including any addendum to the programme memorandum or this product booklet
as specified in the relevant term sheet from time to time) before deciding whether to invest in our
Basket DCDC ELIs:
Name of offering document
(i) Programme memorandum
(ii) Product booklet
(iii) Indicative term sheet
Content of document
The programme memorandum contains an overview of our Programme,
including:
•
Hong Kong taxation issues relating to our non-principal protected
unlisted equity linked investments (ELIs) that we can issue under
our programme;
•
the general procedure of buying our ELIs through a distributor,
how your distributor will hold your ELIs and receive notices, assets
and payments from us on your behalf;
•
a description of our business, financial condition and our financial
statements; and
•
a description of our risk management system.
This product booklet contains the general terms and conditions that apply
to one type of ELIs that we can issue under our Programme, namely,
Basket DCDC ELIs.
This product booklet also explains how our Basket DCDC ELIs work and
sets out the product features and risk factors relating to our Basket
DCDC ELIs. To help your understanding, we have also included six key
facts statements on pages 4 to 63 of this product booklet and one
hypothetical example on pages 74 to 82 to illustrate how our Basket
DCDC ELIs with daily autocall condition and no knock-in feature work
and one hypothetical example on pages 83 to 92 to illustrate how our
Basket DCDC ELIs with daily autocall condition and daily knock-in
feature work.
The term sheet sets out a summary of the terms that are specific to the
series of Basket DCDC ELIs you wish to buy. These specific terms will
also be set out in the relevant pricing supplement (see also “Legal terms
and conditions of our Basket DCDC ELIs” below).
We have set out in Appendix A to this product booklet a form of
indicative term sheet for our Basket DCDC ELIs. The indicative term
sheet is an offering document provided to investors during the offer
period and sets out some of the commercial variables which will only be
determined at the time you apply for our Basket DCDC ELIs (except for
the terms that may only be determined after your purchase, as set out in
the section headed “Glossary — The Meaning of the Key Terms of our
Basket DCDC ELIs”).
The final term sheet containing all the finalised commercial terms
(including the final exercise price) applicable to a series of Basket
DCDC ELIs will be available for inspection at the offices of the arranger
and the distributor(s) on or after the relevant issue date.
References to the “term sheet” in this product booklet mean both the
indicative term sheet and the final term sheet unless otherwise specified.
— 121 —
C-46
The offer of each series of Basket DCDC ELIs is made only on the basis of our programme
memorandum, this product booklet (together with any addendum to the programme memorandum or
this product booklet as specified in the term sheet) and the relevant indicative term sheet.
Legal terms and conditions of our Basket DCDC ELIs
The following documents set out the legally binding terms and conditions of our Basket DCDC ELIs:
(i)
General terms and conditions of the Basket DCDC ELIs: the general terms and conditions of the Basket
DCDC ELIs that are applicable to all our Basket DCDC ELIs are set out in Appendix B to this product
booklet.
(ii)
Pricing supplement for the Basket DCDC ELIs: the general terms and conditions as set out in Appendix
B to this product booklet may be amended and supplemented by the specific terms and conditions that
are applicable to a series of Basket DCDC ELIs, as set out in the relevant pricing supplement. We have
set out in Appendix C to this product booklet a form of pricing supplement for our Basket DCDC ELIs.
The commercial terms contained in the pricing supplement for a series of Basket DCDC ELI will reflect
the same commercial terms as set out in the relevant term sheet for that series. The English and Chinese
versions of the final term sheet and pricing supplement of each series of Basket DCDC ELIs will be
available for inspection at the offices of the arranger and the relevant distributor(s) on or after the
relevant issue date.
When read together, the general terms and conditions of the Basket DCDC ELIs as set out in Appendix B
to this product booklet and the relevant pricing supplement will constitute the legally binding terms and
conditions applicable to the relevant series of Basket DCDC ELI.
The following offering documents are available free of charge during the offer period through the following
methods of distribution:
Offering Documents
Method of distribution
•
The programme memorandum (including any (i) Printed copies from the distributor(s); and
addenda in respect thereof);
(ii) CD-ROM copies (if any) from the
•
This product booklet (including any addenda
distributor(s) (whether or not CD-ROM copies
in respect thereof)
are being made available for any particular
series of Basket DCDC ELI will be specified in
the relevant term sheet).
The relevant indicative term sheets
(iii) Electronic copies at the Issuer’s website
(www.hsbc.com) (whether or not electronic
copies are being made available for any
particular series of Basket DCDC ELI will be
specified in the relevant term sheet).
(i) Printed copies from the distributor(s); and
(ii)
Electronic copies at the Issuer’s website
(www.hsbc.com) (whether or not electronic
copies are being made available for any
particular series of Basket DCDC ELI will be
specified in the relevant term sheet).
Other legal documentation relating to our Basket DCDC ELIs
(i)
Global certificate - each series of our Basket DCDC ELIs will be represented by a single global
certificate registered in the name of the nominee for the relevant clearing system(s). The applicable
pricing supplement (which amends and supplements the general terms and conditions of the Basket
DCDC ELIs as set out in Appendix B to this product booklet that are incorporated by reference to the
global certificate) will be attached to the global certificate and lodged with the relevant clearing
— 122 —
C-3(b)
system(s). As we do not issue individual certificates to you with respect to your holding of the Basket
DCDC ELIs, to assert your right as an investor in our Basket DCDC ELIs, you will have to rely on your
distributor (directly or indirectly via its custodian) to take action on your behalf. (See also “(ii) Deed
of covenant” below.)
(ii)
Deed of covenant - your distributor or its custodian (as the case may be) which is a participant or
accountholder with the relevant clearing system(s), will be given direct rights of enforcement against
us as issuer under a deed of covenant executed by us if we fail to pay any cash amount or deliver the
physical settlement amount to the legal holder of our Basket DCDC ELIs in accordance with the terms
and conditions of our Basket DCDC ELIs.
(iii) Registrar’s and structured product agency agreement - administrative matters relating to our Basket
DCDC ELIs (including but not limited to, making payment and delivery of the physical settlement
amount due under our Basket DCDC ELIs and arrangements for giving notices to the holders of our
Basket DCDC ELIs) are dealt with in the registrar’s and structured product agency agreement.
Pursuant to the general terms and conditions of the Basket DCDC ELIs as set out in Appendix B to this
product booklet, the legal holder of our Basket DCDC ELIs is entitled to the benefit of, is bound by and is
deemed to have notice of all the provisions of the global certificate, the applicable pricing supplement, the
deed of covenant and the registrar’s and structured product agency agreement. For further details of these
legal documentation, please also refer to the section headed “Our Non-Principal Protected Unlisted Equity
Linked Investment Programme — Main Features” in the programme memorandum. If you are in any doubt
about the contents of these legal documentation, you should seek independent professional advice.
HOW CAN I BUY THE BASKET DCDC ELIs?
•
If you wish to purchase our Basket DCDC ELIs, you will have to place your Basket DCDC ELI
purchase order with your distributor. You can enquire about the Basket DCDC ELIs we offer by
contacting the appointed distributor(s) specified in the term sheet. You cannot purchase the Basket
DCDC ELIs directly from us (in our capacity as issuer). You must already have, or must open, an
investment account and a cash account with the appointed distributor(s). Your distributor will hold your
Basket DCDC ELIs for you in your investment account — you will not be holding the Basket DCDC
ELIs directly as we will not be issuing individual certificates for our Basket DCDC ELIs. Your
distributor will inform you the amount you have to pay and any applicable fees (including handling
fees) it charges to make your application and to open and maintain your securities or investment
account. Please contact your distributor for further details.
•
Once you have made your investment decision, you will need to complete a Basket DCDC ELI
subscription form which can be obtained at any designated branches of the appointed distributor(s) for
the Basket DCDC ELIs. Unless the post-sale cooling-off period is applicable (see section below on “Is
there a post-sale cooling-off period for our Basket DCDC ELIs?”) or you have cancelled your order
within the specified period of time as notified by your distributor following the publication of an
updated programme memorandum and/or an addendum to the programme memorandum and/or this
product booklet during the offer period after you have placed your order, you are committed to purchase
the Basket DCDC ELIs once you have placed the relevant purchase order with your distributor.
•
Your Basket DCDC ELI purchase order will be executed by us on the trade date and your distributor
will pay the purchase consideration (being the issue price) to us on your behalf on the issue date, which
is a day falling 6 to 10 business days after the trade date. A contract note prepared by your distributor
containing all the finalised commercial terms that apply to your Basket DCDC ELIs will be sent to you
by your distributor within 2 Hong Kong business days after the trade date.
IS THERE A POST-SALE COOLING-OFF PERIOD FOR OUR BASKET DCDC ELIs?
The relevant term sheet will specify whether a post-sale cooling-off period applies to your Basket DCDC
ELIs.
— 123 —
C-3(b)
C-2(o)
Basket DCDC ELIs with an investment period of more than one year
•
If you have purchased a Basket DCDC ELI with an investment period of more than one year, you can
choose to cancel or unwind the whole (and not part of) your Basket DCDC ELI purchase order during
the period from (and including) the date you place your purchase order (the “order date”) to (and
including) the 5th Hong Kong business day after the order date (this period is referred to as the
“post-sale cooling-off period”). If you choose to do so, you will need to submit your instructions to your
distributor between 10:00 a.m. and 12:00 noon on any Hong Kong business day during the post-sale
cooling-off period. Any exercise of your right to cancel or unwind your purchase order shall be
irrevocable. Upon receipt of your instructions to cancel or unwind your purchase order, we (as market
agent) are obliged to cancel or unwind your purchase order and return to you (through your distributor)
a cash amount determined in accordance with the formula stated on page 106 of this product booklet.
•
If you submit your instructions to cancel your Basket DCDC ELI purchase order to your distributor
before your Basket DCDC ELI purchase order has been executed on the trade date, your distributor will
not pay the issue price to us on your behalf on the issue date. However, your distributor may charge
you a handling fee for such cancellation. Please ask your distributor for details. If you submit your
instructions to unwind your Basket DCDC ELI purchase order to your distributor after your Basket
DCDC ELI purchase order has been executed on the trade date, your distributor will pay the issue price
to us on your behalf on the issue date and we will pay your distributor a cash amount equal to the issue
price less any market value adjustments on the later of: (i) 3rd business day after the day you submit
your instructions to unwind your Basket DCDC ELI purchase order; or (ii) the issue date. Your
distributor may charge you a handling fee for the unwinding of your Basket DCDC ELI purchase order
and (if applicable) such handling fee will be deducted from such cash amount. Please check with your
distributor for further details of when you will receive such cash amount from your distributor. The
cash amount returned to you may be substantially less than the original amount invested.
•
If you exercise your right to cancel or unwind your Basket DCDC ELI purchase order during the
post-sale cooling-off period, the cash amount returned to you will not be reduced by any commission
paid by us to your distributor.
•
In addition, in order for you to exercise the right to unwind or cancel your Basket DCDC ELI purchase
order during the post-sale cooling-off period, the following conditions have to be satisfied:
(i)
you have not sold or otherwise transferred the relevant Basket DCDC ELI you wish to unwind
or cancel;
(ii)
if the Basket DCDC ELI has been issued, the Basket DCDC ELI is subsisting and has not
otherwise expired or terminated; and
(iii) you can only choose to unwind or cancel the whole (and not part) of your purchase order of
Basket DCDC ELIs.
Basket DCDC ELIs with an investment period of one year or less
You should note that your right to cancel or unwind your Basket DCDC ELI purchase order during the
post-sale cooling-off period DOES NOT apply to Basket DCDC ELIs with an investment period of one year
or less.
IS THERE ANY MARKET MAKING ARRANGEMENTS FOR YOUR BASKET DCDC ELIs
BEFORE THEIR EXPIRY?
•
We (as market agent) will provide limited market making arrangements for all our Basket DCDC ELIs
(regardless of the length of the investment period and the scheduled tenor of the Basket DCDC ELIs)
on each market making day falling every other Tuesday after the issue date up to the 3rd Hong Kong
business day before the expiry date, or if any such market making day is neither a Hong Kong business
day nor a day on which the Hong Kong Stock Exchange is scheduled to open for trading, that market
making day will be postponed to the next Hong Kong business day on which the Hong Kong Stock
Exchange is open for trading.
— 124 —
C-2(o)
C-39
•
On each market making day, we (as market agent) will provide (via the distributor(s)): (i) indicative bid
prices (on a per Basket DCDC ELI basis) during normal business hours and; (ii) a firm bid price (on
a per Basket DCDC ELI basis) upon your request, provided that your request for a firm bid price is
submitted to your distributor between the opening of the morning session of the Hong Kong Stock
Exchange and the close of the morning session of the Hong Kong Stock Exchange on such market
making day. You may choose to sell part of or the entire holding of your Basket DCDC ELIs provided
that the minimum sell back order is equal to one Basket DCDC ELI and the total amount of Basket
DCDC ELIs you wish to sell is an integral number.
•
The indicative bid prices will be determined by us at our sole and absolute discretion acting in good
faith and in a commercially reasonable manner and taking into account certain factors such as market
interest rate movements, HSBC’s financial condition, the market’s view of HSBC’s credit quality, the
value of the embedded conditional put option, the price performance and price volatility of the
reference assets in the basket, any accrued potential cash dividend amount and any cost which is, or
would be, incurred by us in unwinding our hedging arrangements relating to the Basket DCDC ELIs.
Such indicative bid prices will be subject to intra-day change, depending on the prevailing market
conditions.
•
The indicative bid prices are provided for your reference only as they may not be the same as the firm
bid price at which we are willing to buy back your Basket DCDC ELIs.
•
Upon your request for a firm bid price, we (as market agent) will determine the firm bid price at which
we are willing to buy back your Basket DCDC ELIs based on the indicative bid price and, depending
on the prevailing market conditions at the time you request for the firm bid price, adjusted for any
intra-day market changes. We will notify your distributor of such firm bid price and your distributor
will in turn inform you. You should note that the firm bid price provided to you by your distributor
will only be valid for a limited period of time as notified to you by your distributor. Upon
acceptance of the firm bid price by you within that specified period of time, we will buy back your
Basket DCDC ELIs at that firm bid price on that market making day. You should note that the amount
you receive from selling your Basket DCDC ELIs back to us on a market making day may be
substantially less than the original amount invested.
•
Your distributor may charge you a handling fee when you sell your Basket DCDC ELIs back to us on
a market making day and such fees or charges will reduce the amount you receive when you sell your
Basket DCDC ELIs back to us before expiry. Please contact your distributor for details.
•
If you choose to sell your Basket DCDC ELIs back to us on a market making day, we will deliver the
sale proceeds of your Basket DCDC ELIs to your distributor on the 3rd business day after that market
making day. Your distributor will deliver such proceeds to you in accordance with its normal operating
procedures. Please check with your distributor for details.
•
In addition, you should note that indicative bid prices and/or firm bid prices and market making
activities may not be available on a market making day if the relevant Basket DCDC ELI is
affected by market disruption events and/or suspension of trading in the reference assets or if we
(as market agent) experience any technical problems beyond our control affecting our ability to
provide a bid price for our Basket DCDC ELIs, including any power failure or breakdown of our
computer system (in which case the affected market making day will be postponed to the next
Hong Kong business day on which the HKSE is open for trading which is not affected by any of
these events or problems).
HOW CAN I FIND OUT THE INDICATIVE BID PRICE OF MY BASKET DCDC ELIs?
•
We (as market agent) will make available (via the distributor(s)) indicative bid prices for all our Basket
DCDC ELIs on each market making day. We will not upload such information onto our website. You
will need to contact your distributor for the most effective way to access the indicative bid prices.
— 125 —
C-40
C-40
C-39
ARE OUR BASKET DCDC ELIS DESIGNED FOR EVERYONE?
C-2(b)
Our Basket DCDC ELIs are designed for experienced investors who:
•
have experience in investing in structured investment products and are looking for more tailored ways
of investing in accordance with their market views. Investors can choose from the range of Basket
DCDC ELIs on offer to suit their investment view, risk appetite and return requirements;
•
take a stable or moderately bullish view on the market price of the reference assets;
•
would like to earn potentially higher returns compared to conventional cash deposits and are prepared
to take a HIGHER level of risk for a part of their investment portfolio;
•
understand that the payout on the Basket DCDC ELI is linked to the performance of the worst
performing asset in the basket (regardless of how well the other assets in the basket may perform);
•
understand that our Basket DCDC ELIs are structured investment products which are not equivalent to
a time deposit or a direct investment in the reference assets;
•
would like to earn periodic potential cash dividend amounts during the scheduled tenor of the Basket
DCDC ELIs;
•
accept that where the physical settlement amount is physically delivered or the cash equivalent of the
physical settlement amount is paid at expiry of the Basket DCDC ELIs, they will effectively be
purchasing the worst performing asset on the expiry date at a price which is higher than the market price
prevailing at expiry of the Basket DCDC ELIs. In an extreme case, investors will not receive any
potential cash dividend amount for the entire scheduled tenor and the physical settlement amount
or its cash equivalent could be worth nothing and they could lose all of your investment; and
•
understand that there will only be limited market making arrangements for all our Basket DCDC ELIs
and therefore are prepared to hold them to their expiry.
Our Basket DCDC ELIs are not designed for inexperienced investors who are not familiar with
structured investment products. You should not buy this product if:
•
you do not have knowledge or experience investing in structured investment products embedded with
derivatives;
•
you do not want to take HSBC’s credit risk;
•
you do not want to risk any part of your capital; or
•
you may need to sell your Basket DCDC ELIs before the end of the scheduled tenor of the Basket
DCDC ELIs for liquidity needs.
HOW WILL I KNOW WHAT THE POTENTIAL CASH DIVIDEND AMOUNT (IF ANY), EARLY
SETTLEMENT AMOUNT AND FINAL SETTLEMENT PAYOUT WILL BE?
•
We will notify the distributor(s) as soon as practicable and in any event no later than three business days
after the determination of the relevant potential cash dividend amount (if any), early settlement amount
and final settlement payout has been made on the relevant date and your distributor will in turn inform
you.
IS THERE A LIMIT ON THE TOTAL PROGRAMME SIZE?
No, there is no limit on the total programme size of our Programme.
— 126 —
C-2(a)
WHERE CAN I FIND MORE INFORMATION ABOUT THE ISSUER AND THE BASKET DCDC
ELIS?
Our Basket DCDC ELIs are issued under our Programme. The Programme is described in our programme
memorandum dated 22 July 2011. Please read the programme memorandum together with this product
booklet (including any addendum to the programme memorandum or this product booklet as specified in the
relevant indicative term sheet) and the relevant indicative term sheet carefully before you decide whether to
buy our Basket DCDC ELIs.
The distributor(s) has an obligation to distribute to you a copy of each of the Basket DCDC ELI offering
documents. You can ask for a printed copy of our current programme memorandum at any distributor where
you can buy our Basket DCDC ELIs, or you can pick up a copy during normal business hours from the offices
of the arranger at Level 15, HSBC Main Building, 1 Queen’s Road Central, Hong Kong.
We have not authorised anyone to give you any information about our Basket DCDC ELIs other than the
information in the offering documents, i.e. this product booklet, the relevant indicative term sheet, our
programme memorandum and any addendum to the programme memorandum or this product booklet as
specified in the relevant term sheet.
You can find out more information on us and the ultimate holding company of our group, HSBC Holdings
plc, from our website www.hsbc.com. Information contained in the websites referred to in this product
booklet or a term sheet does not form part of this product booklet or that term sheet.
Our programme memorandum, this product booklet, (including any addendum to our programme
memorandum or this product booklet as specified in the relevant term sheet) and the relevant term sheet are
also available in a Chinese version if you prefer.
CONTINUING DISCLOSURE OBLIGATIONS
C-38
HSBC, as the issuer and product arranger, will keep the SFC and the distributor(s) informed as soon as
reasonably practicable if (i) HSBC (as issuer) ceases to meet any core requirements in Appendix A to the
Code; (ii) HSBC (as product arranger) ceases to meet any eligibility requirements in 4.2 of the Code; and,
(iii) to the extent permitted by any applicable law, there are changes in our financial condition or other
circumstances which could reasonably be expected to have a material adverse effect on our ability (as issuer)
to fulfil our commitment in connection with our Basket DCDC ELIs. Your distributor will in turn inform you.
Please contact your distributor for further details.
WHO TAKES RESPONSIBILITY FOR THIS PRODUCT BOOKLET, THE TERM SHEETS AND
THE PROGRAMME MEMORANDUM?
The offering documents for our Basket DCDC ELIs include particulars given in compliance with the Code
for the purpose of giving information with regard to HSBC, our Basket DCDC ELIs and our Programme. The
Hongkong and Shanghai Banking Corporation Limited accepts full responsibility for the contents of, and the
completeness and accuracy of the information contained in this product booklet, the relevant term sheet and
the programme memorandum and confirms, having made all reasonable enquiries, that to the best of its
knowledge and belief there is no untrue or misleading statement, or other facts the omission of which would
make any statement therein untrue or misleading.
The programme memorandum (taken together with, and as up-dated by, this product booklet) is accurate at
the date of this product booklet. You must not assume, however, that information in the programme
memorandum or this product booklet is accurate at any time after the date of this product booklet. The
relevant term sheet will tell you if an addendum to any of our offering documents has been published.
The Hongkong and Shanghai Banking Corporation Limited as a distributor and other distributor(s) which sell
our Basket DCDC ELIs are not responsible in any way to ensure the accuracy of the above documents. For
details of the roles and responsibilities of the distributor, please refer to the programme memorandum.
— 127 —
C-34(b)
WHEN WERE THE BASKET DCDC ELIS AUTHORISED BY OUR BOARD OF DIRECTORS?
The offer and issue of the Basket DCDC ELIs under our programme were authorised by resolutions of our
board of directors on 11 August 2003.
WHERE CAN I READ COPIES OF THE LEGAL DOCUMENTATION FOR THE BASKET DCDC
ELIS?
During the offer period for our Basket DCDC ELIs and while any of our Basket DCDC ELIs is outstanding,
you can read copies of the documents (which will be available in the English language only, unless stated
otherwise) which set up our programme free of charge, including:
•
the pricing supplement (in English and Chinese) which, when read together with the general terms and
conditions of the Basket DCDC ELIs as set out in Appendix B to this product booklet, constitutes the
legally binding terms and conditions of the relevant series of Basket DCDC ELIs;
•
the documents listed as documents that will be kept on display on page 19 in our programme
memorandum;
•
this product booklet (in English and Chinese); and
•
the relevant final term sheet in respect of the relevant series of Basket DCDC ELI (in English and
Chinese),
by going to the offices of the arranger at Level 15, HSBC Main Building, 1 Queen’s Road Central, Hong
Kong.
These offices are open only during normal business hours and not on Saturdays, Sundays or public holidays.
A reasonable fee will be charged if you want to take photocopies of any of the documents.
You can find out more about how the legal documentation works by reading our programme memorandum.
IS THIS A PROSPECTUS?
This product booklet, any term sheet and the programme memorandum do not constitute a prospectus under
the Companies Ordinance (Cap. 32, Laws of Hong Kong).
OUR BASKET DCDC ELIs ARE GOVERNED BY HONG KONG LAW
Our Basket DCDC ELIs, the terms and conditions of our Basket DCDC ELIs and all our Programme
documentation are governed by Hong Kong law.
— 128 —
C-41
APPENDIX A
FORM OF INDICATIVE TERM SHEET FOR THE BASKET DCDC ELIs
We set out below the form of indicative term sheet for the Basket DCDC ELIs. We may issue more than one
series of Basket DCDC ELIs on any issue date. You must read the term sheet for the series you are interested
in before applying for a Basket DCDC ELI. The final term sheet with all the finalised commercial terms
inserted will be available on display on or after the issue date.
Issuer: THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED
(a company incorporated in Hong Kong with limited liability and
a licensed bank regulated by the Hong Kong Monetary Authority and registered under the
Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) for Types 1, 2, 4, 5 and 6
regulated activities)
[Date]
[company] [fund] — [stock code].HK
[company] [fund] — [stock code].HK
[Note: there may be a minimum of two and maximum of six reference assets]
[currency] Non-Principal Protected Unlisted Daily Cash Dividend Callable Equity Linked Investments
linked to a Basket of Securities (the “Basket DCDC ELIs”) (with [Daily] [Periodic] Call [and] [Daily]
[At-Expiry] [No] [Knock-in] [Feature]) to be issued pursuant to the Non-Principal Protected Unlisted
Equity Linked Investment Programme (the “Programme”)
(The Basket DCDC ELIs are not traded on any markets operated by Hong Kong Exchanges and
Clearing Limited or any other stock exchanges)
IMPORTANT RISK WARNINGS
●
Structured Investment Product
Our Basket DCDC ELIs are NOT equivalent to time deposits. They are structured investment
products which are embedded with derivatives.
●
Not Principal Protected
Our Basket DCDC ELIs are not principal protected: you could lose all of your investment.
●
Limited Maximum Potential Gain; you may not receive any potential cash dividend amount
The maximum potential gain under this product is capped at the maximum periodic potential cash
dividend amount(s) payable during the scheduled tenor (i.e. the period from (and including) the
issue date to (and including) the settlement date) of the Basket DCDC ELIs (less any cash settlement
expenses). It is possible that you may not receive any potential cash dividend amount for the entire
scheduled tenor of the Basket DCDC ELIs.
●
Potential Payout determined by the Worst Performing Asset
The potential payout under our Basket DCDC ELIs is linked to the performance of the worst
performing asset in the basket (determined by us on each trading day based on the closing price of
each reference asset in the basket on such day). The worst performing asset on each trading day can
be different. It will not matter how well the other reference assets in the basket perform: the potential
payout on our Basket DCDC ELIs is always determined by the asset which performs worst out of
all the reference assets in the basket.
●
No Collateral
Our Basket DCDC ELIs are not secured on any of our assets or any collateral.
●
Limited Market Making Arrangements
Our Basket DCDC ELIs are designed to be held to their expiry date. We (as market agent) will
provide limited market making arrangements on a bi-weekly basis for all our Basket DCDC ELIs.
If you try to sell your Basket DCDC ELIs before expiry, you may receive an amount which is
substantially less than the original amount invested.
— 129 —
●
Not the same as Investing in the Reference Assets
Investing in our Basket DCDC ELIs is not the same as investing in the reference assets. Changes
in the market price of the reference assets may not lead to a corresponding change in the market
value of, or your potential payout under, the Basket DCDC ELIs.
●
Re-investment Risk
Our Basket DCDC ELIs contain an autocall condition. If the autocall condition is satisfied, the
Basket DCDC ELIs will be terminated before expiry and no further potential cash dividend amount
will be payable following termination. You may not be able to enjoy the same rate of return if you
re-invest in other investments with similar risk parameters.
●
Not Covered by Investor Compensation Fund
Our Basket DCDC ELIs are not listed on any stock exchange and are not covered by the Investor
Compensation Fund.
C-34(d)
●
Maximum Loss upon HSBC’s Default or Insolvency
Our Basket DCDC ELIs constitute general, unsecured and unsubordinated contractual obligations of
HSBC as issuer, and of no other person (including the ultimate holding company of our group,
HSBC Holdings plc). When you buy our Basket DCDC ELIs, you will be relying on HSBC’s
creditworthiness. If HSBC becomes insolvent or defaults on its obligations under the Basket DCDC
ELIs, in the worst case scenario, you could lose all of your investment.
C-34(b)
●
English version of the terms and conditions prevails over Chinese version
For the purpose of lodgement with the relevant clearing system(s), the global certificate representing
a series of Basket DCDC ELIs and the terms and conditions of the Basket DCDC ELIs are issued
in the English language only. If there is any inconsistency between the Chinese version of the terms
and conditions of our Basket DCDC ELIs and the English version, the English version will prevail
over the Chinese version. If you do not understand the English version, you should obtain
independent professional advice.
●
Exposure to risk from trade date
You should note that as all the commercial variables of our Basket DCDC ELIs are determined on
the trade date, as you will be subject to the terms and conditions of our Basket DCDC ELIs from
the trade date and you will be exposed to the market risk and the price movement of the reference
assets from the trade date which may affect the market value of the Basket DCDC ELIs.
●
Conflicts of Interest
You should note that potential and actual conflicts of interest may arise from the different roles
played by us and our subsidiaries and affiliates in connection with our Basket DCDC ELIs.
●
You do not have direct contractual rights to enforce our Basket DCDC ELIs
You do not have direct contractual rights against us as the issuer to enforce our Basket DCDC ELIs.
To assert your rights as an investor in our Basket DCDC ELIs, you will have to rely on your
distributor (directly or indirectly via its custodian) to take action on your behalf. If your distributor
fails to take action in accordance with your instructions or if your distributor’s custodian fails to take
action in accordance with the instructions of your distributor, or your distributor or its custodian
becomes insolvent or defaults on its obligations, you will need to take action against your distributor
in accordance with the terms of arrangement between you and your distributor.
Commissions:
We may pay a commission to the distributor(s). Distributor(s)’ commissions and other transaction costs
including our cost of hedging are factored into the original issue price of the Basket DCDC ELIs.
— 130 —
C-34(c)
Terms which are not defined in this term sheet shall have the same meanings as set out in “Appendix
B — General Terms and Conditions of the Basket DCDC ELIs” in the Product Booklet.
[Indicative] Summary Terms
C-3(a)
Issuer:
The Hongkong and Shanghai Banking Corporation Limited (“HSBC”)
Reference Assets:
A basket made up of [ordinary issued shares (each a “Share”) of a
company (each a “Company”)] [and] [units (each a “Unit”) of a fund
(each a “Fund”)] as shown in the table below:
Initial
Spot Price
[to be
[Company]
fixed on
[and]
Trade
[Fund]
Stock Code Date]
[name]
[stock
HKD
code]
[amount]
[name]
[stock
HKD
code]
[amount]
Exercise
Price [to
be fixed on
Trade
Date]
HKD
[amount]
HKD
[amount]
Call Price
[to be
fixed on
Trade
Date]
HKD
[amount]
HKD
[amount]
Floor Price
[to be
fixed on
Trade
Date]
HKD
[amount]
HKD
[amount]
[Knock-in
Price
[to be
fixed on
Trade
Date]
HKD
[amount]
HKD
[amount]]
Currency
in which
[Share]
[and]
[Unit] is
traded
HKD
HKD
Par value
of [Share]
[and]
[Unit]
[currency
amount]
[currency
amount]
[Note: there may be a minimum of two and maximum of six reference
assets]
Offer Period:
[time] on [date] to [time] on [date] (may change without prior notice)
Post-sale Cooling-off Period:
[Applicable, being the period from the date you place your purchase
order to (and including the 5th Hong Kong business day after the order
date). To exercise your right to cancel or unwind your Basket DCDC ELI
purchase order during the post-sale cooling-off period, you will need to
submit your instructions to your distributor between 10:00 a.m. and
12:00 noon on any Hong Kong business day during the post-sale
cooling-off period. Please refer to the paragraph headed “Is there a
Post-sale Cooling-off Period for our Basket DCDC ELIs” on pages 123
to 124 of the Product Booklet] [Not applicable]
Market making arrangements:
Applicable. On each market making day, we (as market agent) will
provide (via the distributor(s)): (i) indicative bid prices (on a per-Basket
DCDC ELI basis) during normal business hours; and (ii) a firm bid price
(on a per-Basket DCDC ELI basis) upon your request, provided that your
request for a firm bid price is submitted to your distributor between the
opening of the morning session of the Hong Kong Stock Exchange and
the close of the morning session of the Hong Kong Stock Exchange on
such market making day. You may choose to sell part of or the entire
holding of your Basket DCDC ELIs provided that the minimum sell back
order is equal to one Basket DCDC ELI and the total amount of Basket
DCDC ELIs you wish to sell is an integral number.
Market making days:
Every other Tuesday after the Issue Date up to the 3rd Hong Kong
business day before the Expiry Date, or if any such day is neither a Hong
Kong business day nor a Scheduled Trading Day, that market making day
will be postponed to the next Hong Kong business day which is also a
Scheduled Trading Day.
Issue Size:
[[number] Basket DCDC ELIs] [This will be available on or after the
Issue Date]
Series Number:
[number]
Issue Price:
[currency amount] (100% of the Nominal Amount)
Trade Date:
The last day of the Offer Period (This is the date on which the terms set
out in square brackets in this term sheet will be fixed)
— 131 —
C-2(a)
If the Trade Date falls on a Disrupted Day and the relevant disruption
occurs before your Basket DCDC ELI purchase order has been executed
on the trade date, we will cancel your purchase order of the Basket
DCDC ELIs on the Trade Date. However, if the relevant disruption
occurs after your Basket DCDC ELI purchase order has been executed on
the trade date, your purchase order of the Basket DCDC ELIs will not be
cancelled and the Trade Date will not be adjusted.
Issue Date:
[date] [(which is the Trade Date plus [insert number between 6 to 10
(both inclusive)] Business Days)]
Expiry Date:
Expected to be [date], or if such day is not a Scheduled Trading Day, the
following Scheduled Trading Day, unless such day is a Disrupted Day (in
which event such day will be postponed in respect of the affected
Reference Asset as provided in the general terms and conditions of the
Basket DCDC ELIs as set out in Appendix B to the Product Booklet.)
Scheduled tenor of the Basket
DCDC ELIs:
The period from and including [Issue Date] to and including [Settlement
Date]
Investment Period:
The period from and including [Trade Date] to and including [Expiry
Date]
Settlement Currency:
[currency]
Nominal Amount:
[currency amount]
Initial Spot Price:
In respect of each Reference Asset, [the Closing Price of such [Share]
[or] [Unit] on the Trade Date] [the prevailing market price of such
[Share] [or] [Unit] at the time your order for the Basket DCDC ELIs is
executed on the Trade Date].
Exercise Price:
In respect of each Reference Asset, [[number]%] [between [number]%
and [number]% [(both rates inclusive)] of its Initial Spot Price, rounded
to the nearest 0.0001, with 0.00005 or above being rounded upwards.
Call Price:
In respect of each Reference Asset, [number]% of its Initial Spot Price,
rounded to the nearest 0.0001, with 0.00005 or above being rounded
upwards.
Floor Price:
In respect of each Reference Asset, [number]% of its Initial Spot Price,
rounded to the nearest 0.0001, with 0.00005 or above being rounded
upwards. [Not applicable.]
Calculation
Period
Calculation Period
Start Date
(starts from but
excludes)#:
Calculation Period
End Date (ends on
and includes)##:
Cash Dividend
Payment Date
(being three
Business Days
after the
Calculation Period
End Date),
expected to be*:
[number]
[number]
[number]
[number]
[number]
[number]
[number]
[number]
[date]
[date]
[date]
[date]
[date]
[date]
[date]
[date]
[date]
[date]
[date]
[date]
[date]
[date]
[date]
[date]
[date]
[date]
[date]
[date]
[date]
[date]
[date]
[date]
C-4(a)
Is the Potential
Cash Dividend
Amount a fixed
or a variable
amount?
[Fixed]
[Fixed]
[Fixed]
[Fixed]
[Fixed]
[Fixed]
[Fixed]
[Fixed]
[Variable]
[Variable]
[Variable]
[Variable]
[Variable]
[Variable]
[Variable]
[Variable]
#
If any such date is not a “Scheduled Trading Day”, the immediately succeeding Scheduled Trading Day.
##
If any such date is not a “Scheduled Trading Day”, the immediately succeeding Scheduled Trading Day, unless such day is a
Disrupted Day (in which event such day will be adjusted as provided in the general terms and conditions of the Basket DCDC
ELIs as set out in Appendix B to the Product Booklet). For the avoidance of doubt, even if such day is a Disrupted Day, for the
purposes of determining “Total Days” in a Calculation Period, such date shall not be adjusted.
— 132 —
C-3(e)
*
If a Calculation Period End Date is adjusted as a result of it being a Disrupted Day, the relevant Cash Dividend Payment Date
will be postponed accordingly. If the Basket DCDC ELI is terminated early on a Call Date, the relevant Potential Cash Dividend
Amount will be paid on the Early Settlement Date (see “Autocall Condition” below).
Fixed Cash Dividend Rate:
[percentage]%
Day-in Cash Dividend Rate:
[percentage]%
Day-out Cash Dividend Rate:
[percentage]%
Maximum Potential Cash
Dividend Percentage:
[number]% of the Nominal Amount ([number]% of the Nominal Amount
per annum)
The Maximum Potential Cash Dividend Percentage is the sum of (i) the
Fixed Cash Dividend Rate for each Calculation Period that the Potential
Cash Dividend Amount is specified as ‘fixed’ and (ii) the Day-in Cash
Dividend Rate for each Calculation Period that the Potential Cash
Dividend Amount is specified as ‘variable’, calculated as follows:
[Fixed Cash Dividend Rate percentage] % x [number of Calculation
Period(s) that the Potential Cash Dividend Amount is specified as
‘fixed’] + [ Day-in Cash Dividend Rate percentage] % x [ number of
Calculation Period(s) that the Potential Cash Dividend Amount is
specified as ‘variable]
The Maximum Potential Cash Dividend Percentage reflects the
potential maximum gain for each Basket DCDC ELI. It is calculated
on the assumption that the autocall condition has not been satisfied
before the expiry date of the Basket DCDC ELIs and an investor can
receive the maximum payout for each Basket DCDC ELI (i.e. the
maximum Potential Cash Dividend Amount on each Cash Dividend
Payment Date and the Nominal Amount on the Settlement Date).
The Maximum Potential Cash Dividend Percentage per annum is
calculated based on the above assumption and on the assumption
that the investment can be rolled over on the same terms for a
one-year period. The Maximum Potential Cash Dividend Percentage
per annum is calculated as follows:
[number]% of the Nominal Amount
[number of months in the investment period
of the Basket DCDC ELIs]
x
12 months
The Maximum Potential Cash Dividend Percentage is inserted for
illustration purposes only and is not an assurance that the investor
will receive an amount equal to the amount described above during
the scheduled tenor of the Basket DCDC ELIs. Any event which
reduces or eliminates the Potential Cash Dividend Amount payable to
the investor during the scheduled tenor of the Basket DCDC ELIs
will reduce the potential return actually achieved by the investor in
respect of each Basket DCDC ELI.
Potential Cash Dividend
Amount:
[(a)] [Fixed Potential Cash Dividend Amount
Applicable for the [nth] Calculation Period [to the [nth] Calculation
Period]
— 133 —
C-18
[The] [Each] Fixed Potential Cash Dividend Amount will be an amount
in the Settlement Currency calculated in accordance with the following
formula:
Nominal Amount x Fixed Cash Dividend Rate
If the Autocall Condition is satisfied, the Fixed Potential Cash Dividend
Amount for the relevant Calculation Period will be calculated on a
pro-rata basis as follows:
Nominal Amount x Fixed Cash Dividend Rate x
No. of Days*
Total Days
* “No. of days” means the number of Scheduled Trading Days from (but
excluding) the relevant Calculation Period Start Date up to (and
including) the relevant Call Date.
The Fixed Potential Cash Dividend Amount will be rounded to the
nearest $0.01, with $0.005 or above being rounded upwards.]
[(a)] [(b)] [Variable Potential Cash Dividend Amount
Applicable for the [nth] Calculation Period [to the [nth] Calculation
Period].
The Variable Potential Cash Dividend Amount will be an amount in the
Settlement Currency calculated in accordance with the following
formula:
(I) Nominal Amount x Day-in Cash Dividend Rate x
Days In
Total Days
PLUS
(II) Nominal Amount x Day-out Cash Dividend Rate x
Days Out
Total Days
If the Autocall Condition is satisfied, the Variable Potential Cash
Dividend Amount for the relevant Calculation Period will be calculated
up to (and including) the relevant Call Date.
The Variable Potential Cash Dividend Amount will be rounded to the
nearest $0.01, with $0.005 or above being rounded upwards.]
Days In:
The total number of Scheduled Trading Days during the relevant
Calculation Period on which the Closing Price of the Worst Performing
Asset on such Scheduled Trading Day is at or above its Floor Price,
provided that if any such Scheduled Trading Day is a Disrupted Day, such
day will be adjusted in respect of the affected Reference Asset as
provided in the general terms and conditions of the Basket DCDC ELIs
as set out in Appendix B to the Product Booklet.
If the Basket DCDC ELIs are early terminated on a Call Date (see
“Autocall Condition” below), the number of “Days In” for the relevant
Calculation Period will be calculated up to (and including) the Call Date
on which the Autocall Condition is satisfied.
— 134 —
Total Days:
The total number of Scheduled Trading Days in the relevant Calculation
Period, regardless of whether the Autocall Condition is satisfied. For the
avoidance of doubt, for the purposes of determining “Total Days” in a
Calculation Period, all of the Scheduled Trading Days in a Calculation
Period will be counted regardless of whether there are any Disrupted
Days within such Calculation Period.
Days Out:
The total number of Scheduled Trading Days during the relevant
Calculation Period on which the Closing Price of the Worst Performing
Asset on such Scheduled Trading Day is below its Floor Price, provided
that if any such Scheduled Trading Day is a Disrupted Day, such day will
be adjusted in respect of the affected Reference Asset as provided in the
general terms and conditions of the Basket DCDC ELIs as set out in
Appendix B to the Product Booklet.
If the Basket DCDC ELIs are early terminated on a Call Date (see
“Autocall Condition below), the number of “Days Out” for the relevant
Calculation Period will be calculated up to (and including) the Call Date
on which the Autocall Condition is satisfied.
Autocall Condition:
[Daily] [Periodic] Autocall Condition applies. Condition 3(a) is
applicable — see “Key Facts Statement [A] [B] [C] [D] [E] [F] —
Non-Principal Protected Unlisted Daily Cash Dividend Callable Equity
Linked Investments Linked to a Basket of Securities (Basket DCDC
ELIs) with [Daily] [Periodic] Autocall Condition and [[Daily]
[At-Expiry] Knock-in] [Feature] [No Knock-in Feature]”
If the Closing Price of the Worst Performing Asset on a Call Date is at
or above its Call Price, the Autocall Condition is satisfied and the Basket
DCDC ELIs will be terminated on such Call Date [(regardless of whether
a Knock-in Event has occurred)].
Early Settlement Amount:
If the Autocall Condition is satisfied on a Call Date, each investor will
receive a cash amount in the Settlement Currency equal to the Nominal
Amount, less any Cash Settlement Expenses (as more fully described in
the general terms and conditions of the Basket DCDC ELIs as set out in
Appendix B to the Product Booklet) on the Early Settlement Date.
Each investor will also receive on the Early Settlement Date any accrued
Potential Cash Dividend Amount calculated up to (and including) the
Call Date on which the Autocall Condition is satisfied.
Call Date(s):
[Each of [dates] or if any such day is not a Scheduled Trading Day, the
immediately succeeding Scheduled Trading Day]1 [Any Scheduled
Trading Day during a Calculation Period]2 [following (and including) the
Calculation Period End Date of the [nth] Calculation Period (excluding
the Expiry Date)]3, provided that if any such day is a Disrupted Day, such
day will be adjusted in respect of the affected Reference Asset as
provided in the general terms and conditions of the Basket DCDC ELIs
as set out in Appendix B to the Product Booklet.
Early Settlement Date:
The day that is three Business Days after the Call Date on which the
Autocall Condition is satisfied and the Basket DCDC ELIs have been
early terminated.
1
2
3
Applicable if periodic autocall condition applies.
Applicable if daily autocall condition applies.
Applicable if daily or periodic autocall condition applies after a specified calculation period.
— 135 —
C-4(a)
For the avoidance of doubt, if the Issuer is unable to obtain the Closing
Price on a Call Date as a result of it being a Disrupted Day, that Call Date
will be adjusted in respect of the affected Reference Asset as provided in
the general terms and conditions of the Basket DCDC ELIs as set out in
Appendix B to the Product Booklet and the Early Settlement Date shall
be the 3rd Business Day following the adjusted Call Date; provided that
no Potential Cash Dividend Amount shall be payable in respect of the
period between the date scheduled as the original Call Date and the Early
Settlement Date in such circumstances.
Knock-in Event:
[A Knock-in Event occurs if the Closing Price of the Worst Performing
Asset is at or below its Knock-in Price on [any] [the] Knock-in Event
Date.] [Not Applicable]
[Knock-in Event Date:
[Daily] [At-Expiry] Knock-In applies — see “Key Facts Statement [B]
[C] [E] [F] — Non-Principal Protected Unlisted Daily Cash Dividend
Callable Equity Linked Investments Linked to a Basket of Securities
(Basket DCDC ELIs) with [Daily] [Periodic] Autocall Condition and
[Daily] [At-Expiry] Knock-in Feature”
[Each Scheduled Trading Day during the period from (but excluding) the
Trade Date to (and including) [the [nth] Calculation Period End Date] [the
Expiry Date]] [The Expiry Date], provided that if any such day is a
Disrupted Day, such day will be adjusted in respect of the affected
Reference Asset as provided in the general terms and conditions of the
Basket DCDC ELIs as set out in Appendix B to the Product Booklet.
Knock-in Price:
In respect of each Reference Asset, [number]% of its Initial Spot Price,
rounded to the nearest 0.0001, with 0.00005 or above being rounded
upwards.]4
Worst Performing Asset:
In respect of a Scheduled Trading Day and the Reference Assets, the
[Share] [or] [Fund] which generates the lowest percentage calculated in
accordance with the following formula (rounded to the nearest 4 decimal
places, with 0.00005% being rounded upwards):
[Closing Price of the relevant [Share] [or] [Unit]
on the relevant Scheduled Trading Day
x 100%] (“Performance”)
Initial Spot Price of the
relevant [Share] [or] [Unit]
If more than one [Share] [or] [Fund] has the same lowest Performance on
a Scheduled Trading Day, the Issuer shall select, in its sole and absolute
discretion acting in good faith and a commercially reasonable manner,
any one of such [Shares] [or] [Funds] to be the Worst Performing Asset.
Mode of Settlement at Expiry
4
5
6
7
When investors place an order for the Basket DCDC ELIs, investors will
be required to elect for physical settlement or cash settlement upon
expiry of the Basket DCDC ELIs in the case where [a Daily Knock-in
Event has occurred and]5 [the Closing Price of the Worst Performing
Asset on the Expiry Date is below the Exercise Price and the Call Price]6
[an At-Expiry Knock-in Event has occurred]7. Investors may change their
election at any time but no later than 4:00 p.m. (Hong Kong time) on the
3rd Hong Kong business day prior to the Expiry Date by contacting their
Distributor.
Applicable if daily or at-expiry knock-in event applies
Applicable if daily knock-in event applies
Delete if at-expiry knock-in event is applicable
Applicable if at-expiry knock-in event applies
— 136 —
C-4(a)
Final Settlement Payout:
Upon the expiry of the Basket DCDC ELIs, the investor will receive on
the Settlement Date the Final Settlement Payout determined by the Issuer
as follows:
[Where a Daily Knock-in Event is applicable]
[1)
if:
(i)
a Daily Knock-in Event has not occurred; or
(ii)
a Daily Knock-in Event has occurred but the Closing Price of
the Worst Performing Asset on the Expiry Date is at or above
EITHER its Exercise Price OR its Call Price,]
[Where an At-Expiry Knock-in Event is applicable]
[1)
if an At-Expiry Knock-in Event has not occurred,]
[Where the Knock-in Event is not applicable]
[1)
the Closing Price of the Worst Performing Asset on the Expiry Date
is at or above EITHER its Exercise Price OR its Call Price,]
investors will receive on the Settlement Date a cash amount in the
Settlement Currency equal to the Nominal Amount (less Cash
Settlement Expenses, if any) and any Potential Cash Dividend
Amount for the final Calculation Period; or
[Where a Daily Knock-in Event is applicable]
[2)
if a Daily Knock-in Event has occurred and the Closing Price of
the Worst Performing Asset on the Expiry Date is below BOTH its
Exercise Price AND its Call Price, investors will receive on the
Settlement Date either:]
[Where an At-Expiry Knock-in Event is applicable]
[2)
if an At-Expiry Knock-in Event has occurred, investors will receive
on the Settlement Date either:]
[Where the Knock-in Event is not applicable]
[2)
if the Closing Price of the Worst Performing Asset on the Expiry
Date is below BOTH its Exercise Price AND its Call Price,
investors will receive on the Settlement Date either:]
(a)
if the investor has elected for physical settlement — a number
of Worst Performing Asset on the Expiry Date equal to the
Physical Settlement Amount (after payment by the investor of
all Physical Settlement Expenses) and a cash payment for any
fractional shares or units of the Worst Performing Asset on
the Expiry Date (see “Fractional shares or units” below); No
Cash Settlement Expenses will be payable for the cash
payment of such fractional shares or units; or
— 137 —
(b)
if the investor has elected for cash settlement — a cash
amount in the Settlement Currency equal to the Cash
Equivalent of the Physical Settlement Amount (less Cash
Settlement Expenses, if any).
Each investor will also receive on the Settlement Date any Potential Cash
Dividend Amount for the final Calculation Period.
You should note that your Final Settlement Payout under the Basket
DCDC ELIs will be reduced by any distributor’s charges and any
Cash Settlement Expenses or Physical Settlement Expenses payable
on settlement of the Basket DCDC ELIs.
You should note that if (a) or (b) above occurs, you will suffer a loss
if the market value of the Physical Settlement Amount (together with
any fractional shares or units of the Worst Performing Asset or the
Expiry Date) (in both cases calculated based on the Closing Price of
the Worst Performing Asset on the Expiry Date) or the Cash
Equivalent of the Physical Settlement Amount, together with any
Potential Cash Dividend Amount(s) paid during the scheduled tenor
of the Basket DCDC ELIs, is less than your original amount invested.
In an extreme case, you will not receive any Potential Cash Dividend
Amount for the entire scheduled tenor and the Physical Settlement
Amount or its cash equivalent could be worth nothing and you could
lose all of your investment.
If you elect for physical settlement, the Physical Settlement Amount
will only be delivered to you on the Settlement Date. Therefore, you
will be exposed to any movement in the market price of the Worst
Performing Asset on the Expiry Date during the period between the
Expiry Date and the Settlement Date, which will be a period of 3
business days. If you choose not to realise your holding of such Worst
Performing Asset on the Settlement Date, you will also be exposed to
the market risk of holding such Worst Performing Asset.
Physical Settlement Amount:
In respect of each Basket DCDC ELI, a number of the Worst Performing
Asset on the Expiry Date calculated as follows (rounded down to the
nearest whole number of the Worst Performing Asset on the Expiry
Date):
Nominal Amount
(converted into Hong Kong dollars at the
Exchange Rate where necessary)
Exercise Price of the Worst Performing
Asset on the Expiry Date
Any odd lot(s) of the Worst Performing Asset on the Expiry Date will be
delivered to you as part of the Physical Settlement Amount.
Any fractional shares or units of the Worst Performing Asset on the
Expiry Date will not be delivered to you as part of the Physical
Settlement Amount (see “Fractional shares or units” below).
The Physical Settlement Amount will be calculated on a per-Basket
DCDC ELI basis.
— 138 —
Fractional shares or units:
Any fractional shares or units of the Worst Performing Asset on the
Expiry Date (rounded to the nearest 0.0001, with 0.00005 or above being
rounded upwards) (the “Excess Lot”) will be settled by payment of a
cash amount in the Settlement Currency calculated based on the Closing
Price of the Worst Performing Asset on the Expiry Date[, divided by the
Exchange Rate (if applicable)], rounded to the nearest 0.01, with 0.005
or above being rounded upwards. No Cash Settlement Expenses will be
payable for the cash payment of any fractional shares or units of the
Worst Performing Asset on the Expiry Date to you.
Cash Equivalent of the Physical
Settlement Amount:
In respect of each Basket DCDC ELI, a cash amount in the Settlement
Currency calculated as follows, rounded to the nearest 0.01, with 0.005
or above being rounded upwards, less Cash Settlement Expenses:
Nominal Amount
Closing Price of the Worst
Performing Asset on
x
Exercise Price of the Worst
the Expiry Date
Performing Asset
The Cash Equivalent of the Physical Settlement Amount will be
calculated on a per-Basket DCDC ELI basis.
Settlement Date:
The 3rd Business Day following the Expiry Date, which is expected to be
on or about [date].
C-4(a)
(provided where the Physical Settlement Amount is deliverable to you, if
such date is not a Clearance System Business Day, the following
Clearance System Business Day, subject to the occurrence of a
Settlement Disruption Event).
For the avoidance of doubt, if the Issuer is unable to obtain the Closing
Price on the Expiry Date as a result of it being a Disrupted Day, the
Expiry Date will be adjusted in respect of the affected Reference Asset as
provided in the general terms and conditions of the Basket DCDC ELIs
as set out in Appendix B to the Product Booklet and the Settlement Date
shall be the 3rd Business Day following the adjusted Expiry Date;
provided that no Potential Cash Dividend Amount shall be payable in
respect of the period between the date scheduled as the original Expiry
Date and the Settlement Date in such circumstances.
Minimum Investment Amount:
[HKD100,000 (or its equivalent in foreign currency)]
C-3(c)
Minimum Transfer Amount:
one Basket DCDC ELI
C-3(f)
Exchange:
The Stock Exchange of Hong Kong Limited
Related Exchange:
[Exchange] [Each exchange or quotation system where trading has a
material effect on the overall market for futures or options contracts
relating to the Share or Unit as determined by the Issuer in its good faith
acting in a commercially reasonable manner.]
Exchange Rate:
[The mid-market exchange rate for Hong Kong dollars per 1 Settlement
Currency as per [Reuters Page [page]] at the Valuation Time on the
Expiry Date.] [Not Applicable]
Valuation Time:
The official close of trading on the Exchange.
Closing Price:
In respect of a Reference Asset, the closing price of such Reference Asset
on the Exchange at the Valuation Time on such Scheduled Trading Day
as quoted on the Exchange.
— 139 —
Cash Settlement Expenses:
All charges or expenses including any taxes and duties that are incurred
by the Issuer in connection with making the payment of the settlement
amount in cash (including the Early Settlement Amount, the Nominal
Amount or the Cash Equivalent of the Physical Settlement Amount (as
the case may be)) to you. No Cash Settlement Expenses will be payable
for the cash payment of any fractional shares or units of the Worst
Performing Asset on the Expiry Date to you. [Currently there are no such
charges or expenses. If any Cash Settlement Expenses are payable in the
future, we will inform the Distributor(s) as soon as practicable and your
Distributor will in turn inform you in advance.] [Please ask your
Distributor for details.]
Physical Settlement Expenses:
Physical settlement expenses are out-of-pocket expenses relating to the
transfer and receipt of the Physical Settlement Amount which are payable
when such Physical Settlement Amount is delivered to you on the
Settlement Date of the Basket DCDC ELIs.
C-3(d)
These expenses include buyer’s stamp duty payable for the delivery of
the Physical Settlement Amount delivered to you (calculated based on the
Closing Price of the Worst Performing Asset on the Expiry Date),
transaction levies, registration charges and any other charges levied by
your Distributor in connection with the provision of custodial, transfer
and clearing services. Please ask your Distributor for details.
Any fractional shares or units of the Worst Performing Asset on the
Expiry Date will be settled by a cash payment and no Physical Settlement
Expenses will be payable for such fractional shares or units.
Distributor Charges:
You should contact your Distributor for details.
Additional provisions
relating to physical
settlement:
The Issuer will procure delivery of the Physical Settlement Amount on
the Settlement Date by way of electronic settlement through the Central
Clearing and Settlement System established and operated by Hong Kong
Securities Clearing Company Limited.
Legal Terms and Conditions:
See the section entitled “General Terms and Conditions of the Basket
DCDC ELIs” in Appendix B of the Product Booklet and the Pricing
Supplement for this series of Basket DCDC ELIs (see “Pricing
Supplement” below).
When read together, the general terms and conditions of the Basket
DCDC ELIs as set out in Appendix B to the Product Booklet and the
Pricing Supplement will constitute the legally binding terms and
conditions applicable to this series of Basket DCDC ELIs.
This term sheet contains a summary of the legally binding terms and
conditions of the Basket DCDC ELIs.
A contract note prepared by your Distributor containing all the finalised
commercial terms will be sent to you by your Distributor within 2 Hong
Kong business days after the trade date.
Pricing Supplement:
The Pricing Supplement will be issued on the Issue Date. The Pricing
Supplement will amend and supplement the general terms and conditions
of the Basket DCDC ELIs as set out in Appendix B to the Product
Booklet. The Pricing Supplement will be available for inspection at the
offices of the Arranger and the Distributor(s).
— 140 —
C-4(a)
Business Day Centre(s):
[city(ies)] in relation to the (i) Settlement Date; (ii) the Early Settlement
Date; and (iii) each Cash Dividend Payment Date and [city(ies)] for all
other dates.
Arranger and Market Agent:
The Hongkong and Shanghai Banking Corporation Limited
Distributor(s):
[The Hongkong and Shanghai Banking Corporation Limited (852)
[number]/Distributor(s)’ names and numbers]
Registrar:
The Hongkong and Shanghai Banking Corporation Limited, Singapore
Branch
ISIN:
[number] [(This will be available on or after the Issue Date)]
Form of Basket DCDC ELI:
Registered ELI
Clearing:
[Euroclear and/or Clearstream, Luxembourg] [CCASS or [name] as the
Additional Clearing System]
Listing:
Unlisted
Governing Law of the Terms
and Conditions of the Basket
DCDC ELIs:
Hong Kong
Selling Restrictions:
No sales to [USA, USA citizens, Canada and Canadian residents]
You should note that the dates stated in this Term Sheet may be adjusted in accordance with the general terms
and conditions of the Basket DCDC ELIs as set out in Appendix B to the Product Booklet. Notice will be
given to the Distributor(s) for any such change.
[Updated information
[The [[NUMBER][st/nd/rd/th] paragraph under the] [sub-]section headed [TITLE] on page[s] [NUMBER] [to
[NUMBER]] of [DOCUMENT] shall be [deleted/replaced/amended/supplemented by the following:]/
[deleted/replaced/amended/supplemented, the details of which are set out in an addendum dated
[DATE]]/[The following shall be added after the [[NUMBER][st/nd/rd/th] paragraph under the] [sub-]section
headed [TITLE] on page[s] [NUMBER] [to [NUMBER]] of [DOCUMENT]:]
[DETAILS OF CHANGES]
Cancellation of offer
We reserve the right to cancel the offering of this series of Basket DCDC ELIs on or before the end of the
Offer Period. Upon such cancellation, we will notify the Distributor(s) who will in turn notify you. If the
offering of this series of Basket DCDC ELIs has been cancelled, your distributor will not pay the issue price
to us on your behalf on the issue date. We will not charge you any fees if we cancel the offering of this series
of Basket DCDC ELIs but your Distributor may charge you a handling fee. Please check with your
Distributor for further details.
Information relating to the [Share] [and] [Unit]
[[Risk of having synthetic ETFs that aim to track the performance of an index]
Some ETFs may not invest directly in the index constituents but instead they may synthetically replicate the
performance of the index by investing in derivatives issued by market counterparties that are linked to the
index constituents or the index. For these synthetic ETFs, you are exposed to the credit risk and potential
contagion and concentration risks of the counterparties; risk that the market value of any collateral to reduce
counterparty risk has fallen substantially; and higher liquidity risk if the synthetic ETF involves derivatives
which do not have an active secondary market. There may be disparity between the performance of a
— 141 —
C-3(b)
synthetic ETF and the performance of the underlying index. A synthetic ETF may trade at a higher premium
or discount to its net asset value (NAV). The market value of the derivatives and the synthetic ETF may drop
substantially in these circumstances and may adversely affect the value of the Basket DCDC ELIs in which
case you may suffer a loss in your investment. Please refer to the sections headed “Risk Warnings” in the
Product Booklet and the relevant ETF offering documents for further information.]*
[[SHARE] and] [SHARE] ([the][each a] “Newly Listed Share”)] [and] [[FUND] and] [FUND] ([the] [each
a] “Newly Listed Fund”)] [was][were] listed on the Exchange on [date] [and [date] respectively]. Prior to the
listing of the [Newly Listed Share[s]] [and] [Newly Listed Fund[s]], there had been no public market for the
[Newly Listed Share[s]] [and] [Newly Listed Fund[s]] and an active public market for the [Newly Listed
Share[s]] [and] [Newly Listed Fund[s]] may not develop or be sustained in the future. You will not be able
to analyse or compare the trading history of the [Newly Listed Share[s]] [and] [Newly Listed Fund[s]],
particularly in relation to either the price volatility or liquidity which may have an impact on the return on
your investment.
Although the [Newly Listed Share[s]] [and] [Newly Listed Fund[s]] [is][are] listed on the Exchange, there
is no guarantee that a trading market for the [Newly Listed Share[s]] [and] [Newly Listed Fund[s]] will
develop or, if a market does develop, the liquidity of that market. Also, the price and trading volume of the
[Newly Listed Share[s]] [and] [Newly Listed Fund[s]] may be highly volatile subject to the market sentiment,
and may be more volatile than would generally be expected for a [stock] [or] [fund] that has a longer trading
history.]**
All the [Shares] [and] [Units] are listed on the Exchange and the [Company] [Companies] [and] [Fund]
[Funds] [is] [are] required by the Exchange to continuously disclose information that has a material impact
on market activity in and the price of their securities. You can find information about the [Company]
[Companies] [and] [Fund] [Funds] on the website: http://www.hkexnews.hk operated by the Exchange in
addition to the [Company’s] [Companies’] [and] [Fund’s] [Funds’] website: http://www.[website address]
and http://www.[website address]. You may obtain historic price information of the [Company] [Companies]
[and] [Fund] [Funds] on the website operated by the Exchange at http://www.hkexnews.hk/index.htm.
Information contained in the websites referred to in this Term Sheet does not form part of the Programme
Memorandum, the Product Booklet or this Term Sheet. We do not accept any responsibility for information
contained in such third party websites.
Offer documentation
Hard copies [and CD-ROM copies] of the Programme Memorandum and the Product Booklet (including any
addendum to the Programme Memorandum or the Product Booklet as specified in this Term Sheet) will be
available (free of charge) from the Distributor(s). [Electronic copies of such documents [and this Term Sheet]
are also available at the Issuer’s website (www.hsbc.com).]
The offer of this Series of Basket DCDC ELIs is made solely on the basis of the information contained in
the Programme Memorandum dated 22 July 2011 [(as supplemented by an addendum dated [date])] (the
“Programme Memorandum”), the Product Booklet dated 22 July 2011 [(as supplemented by an addendum
dated [date])] (the “Product Booklet”) and this Term Sheet. Accordingly, you should exercise an appropriate
degree of caution when assessing the value of other sources of information relating to us, the Basket DCDC
ELIs or the [Company] [Companies] [and] [Fund] [Funds]. If you are in any doubt about any of the Basket
DCDC ELI offering documents, you should obtain independent professional advice.
Responsibility Statement
The information contained in the offering documents is accurate at the date of this Term Sheet. The offering
documents for our Basket DCDC ELIs include particulars given in compliance with the Code on Unlisted
Structured Investment Products issued by the Securities and Futures Commission (the “SFC”) (the “Code”)
for the purpose of giving information with regard to The Hongkong and Shanghai Banking Corporation
Limited (“HSBC”), the Basket DCDC ELIs and our Programme. HSBC accepts full responsibility for the
*
**
Insert if a reference asset in a synthetic ETF.
Insert if a reference asset is a newly listed share or fund on the Hong Kong Stock Exchange.
— 142 —
C-34(b)
contents of, and the completeness and accuracy of the information contained in the Basket DCDC ELI
offering documents and confirms, having made all reasonable enquiries, that to the best of its knowledge and
belief there is no untrue or misleading statement, or other facts the omission of which would make any
statement herein untrue or misleading. HSBC also confirms that it meets the applicable eligibility
requirements under the Code and the Basket DCDC ELIs comply with the Code.
No material adverse change
C-31
Taking into account the nature of the Basket DCDC ELIs being offered and save as disclosed in the sections
headed “Other Information about our Programme” and “Information about The Hongkong and Shanghai
Banking Corporation Limited” in the Programme Memorandum [and in an addendum to the Programme
Memorandum dated [date]], there has been no material adverse change in our financial or trading position
since the date of our latest financial statements contained in the Programme Memorandum.
No material litigation
C-32
[Save as disclosed in the sections headed “Other Information about our Programme” and “Information about
The Hongkong and Shanghai Banking Corporation Limited” in the Programme Memorandum [and in an
addendum to the Programme Memorandum dated [date]],] [T][t]here are no litigation or arbitration
proceedings against or affecting us, nor are we aware of any claims pending or, to our knowledge, threatened
against us, which are material in the context of the issue of the Basket DCDC ELIs.
Not investment advice
Structured products are complex and may involve a high risk of loss. Prior to entering into a transaction you
should consult with your own legal, regulatory, tax, financial and accounting advisors to the extent you
consider it necessary, and make your own investment, hedging and trading decisions based upon your own
judgement and advice from those advisers you consider necessary.
This Term Sheet should not be treated as giving any investment advice. This Term Sheet shall not be copied
or reproduced without HSBC’s prior written permission.
SFC disclaimer statement
The SFC has authorised our Basket DCDC ELIs under Section 104A(1) of the Securities and Futures
Ordinance (Cap. 571, Laws of Hong Kong) (the “SFO”) and the issue of this Term Sheet based on the
standard template as set out in Appendix A to the Product Booklet under Section 105(1) of the SFO. The SFC
takes no responsibility for our Basket DCDC ELIs or the contents of this Term Sheet, makes no
representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any
loss howsoever arising from or in reliance upon the whole or any part of the contents of this Term Sheet. The
SFC’s authorization does not imply SFC’s endorsement or recommendation of our Basket DCDC ELIs
referred to in this Term Sheet nor does it imply that the SFC guarantees the commercial merits of our Basket
DCDC ELIs or their performance. The SFC’s authorisation does not mean our Basket DCDC ELIs are
suitable for all investors nor is it an endorsement of their suitability for any particular investor or class of
investors. Interested persons should consider obtaining independent professional advice before investing in
our Basket DCDC ELIs. HSBC takes full responsibility as to the issue and the contents of this Term
Sheet.
— 143 —
[Annex
INFORMATION SUPPLEMENTAL TO
THE PROGRAMME MEMORANDUM
The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) [held its annual general meeting
(“AGM”) on [DATE]] [and] [published [a media release/[DOCUMENT]] on [DATE]]. Selected relevant
parts of the [media release dated [DATE] [and] [[DOCUMENT] relating to the AGM] [and] [DOCUMENT]]
is set out below. The selected relevant parts of the [media release [and] [DOCUMENT] relating to the AGM]
[and] [DOCUMENT]] supplement certain information contained in the Programme Memorandum.
[To be inserted]]
— 144 —
APPENDIX B
GENERAL TERMS AND CONDITIONS OF THE BASKET DCDC ELIS
The SFC takes no responsibility as to the contents of the general terms and conditions of the Basket DCDC
ELIs as set out in this Appendix B (the “Conditions”). SFC authorisation does not imply SFC’s
endorsement of the Conditions.
The relevant Conditions will, together with the supplemental provisions contained in the applicable Pricing
Supplement and subject to completion and amendment, be incorporated by reference into each Global
Certificate (as defined below). The applicable Pricing Supplement in relation to the issue of any series of
ELIs may specify additional terms and conditions which shall amend and supplement the relevant Conditions
for the purpose of such series of ELIs. The applicable Pricing Supplement (or the relevant provisions thereof)
will be endorsed upon, or attached to, each Global Certificate. Capitalised terms used in the relevant
Conditions and not otherwise defined therein shall have the meaning given to them in the applicable Pricing
Supplement. The relevant Term Sheet will contain a summary of the terms and conditions applicable to the
relevant series of ELIs.
The Global Certificate will be issued in the English language and the English version of the general terms
and conditions, as amended and supplemented by the English version of the applicable pricing supplement,
will be incorporated by reference into each global certificate, which shall prevail over any Chinese language
version in the event of conflict or discrepancy.
1.
Form, Status, Transfer and Title
(a)
Form. The Equity Linked Investments (“ELIs”) relating to a basket comprising Shares of each of
the Companies or, as the case may be, Units of each of the Funds, are issued in registered form
subject to and with the benefit of a global certificate by way of deed poll (the “Global
Certificate”) made by The Hongkong and Shanghai Banking Corporation Limited (the “Issuer”)
and a registrar’s and structured product agency agreement (such agreement as amended and/or
supplemented and/or restated from time to time, the “Registrar’s Agreement”) dated 19
December 2003 made between the Issuer, The Hongkong and Shanghai Banking Corporation
Limited, Singapore Branch as registrar (in such capacity, the “Registrar”, which expression shall
include any successors) and The Hongkong and Shanghai Banking Corporation Limited as agent
(in such capacity, the “Agent”, which expression shall include any successors). The ELI holders
(as defined below) are entitled to the benefit of the Deed of Covenant (the “Deed of Covenant”)
dated 19 December 2003 and made by the Issuer under the terms of which accountholders in
Euroclear Bank S.A./N.V., as operator of the Euroclear system (“Euroclear”) and Clearstream
Banking, société anonyme (“Clearstream, Luxembourg”) and/or other additional clearing
system or systems as specified in the applicable pricing supplement (each an “Additional
Clearing System”) are given directly enforceable rights against the Issuer under the ELIs. The
original of the Deed of Covenant is held by the Agent.
The Global Certificate will be registered in the name of a nominee (the “Nominee”) of the
relevant clearing system. ELIs in definitive form will only be issued in exchange for the Global
Certificate if Euroclear and/or Clearstream, Luxembourg and/or the Additional Clearing System
(as the case may be) are closed for business for a continuous period of 14 days (other than by
reason of holidays, statutory or otherwise) or announce an intention permanently to cease
business and do so cease business and no alternative clearing system satisfactory to the Issuer, the
Registrar and the Agent is available. In the event of any such exchange, references in these
Conditions to the Global Certificate shall be deemed to be, as appropriate, references to such
definitive certificates.
The applicable Pricing Supplement for the ELIs is attached to the Global Certificate and
supplements the Conditions and may specify other terms and conditions which shall amend and
supplement the Conditions for the purposes of the ELIs. References herein to the “applicable
Pricing Supplement” are to the Pricing Supplement attached to the Global Certificate.
— 145 —
C-2(h)
Certified copies of the applicable Pricing Supplement, the Deed of Covenant and the Registrar’s
Agreement are available for inspection at the specified office of the Issuer during the period
beginning on the Issue Date and ending on the Expiry Date.
The ELI holders are entitled to the benefit of, are bound by and are deemed to have notice of all
the provisions of the Global Certificate, the applicable Pricing Supplement, the Deed of Covenant
and the Registrar’s Agreement.
2.
(b)
Status. The ELIs represent general, unsecured and unsubordinated contractual obligations of the
Issuer and of no other person and rank pari passu among themselves and (save for certain
obligations required to be preferred by law) equally with all other unsecured and unsubordinated
contractual obligations of the Issuer.
(c)
Transfer. ELIs will be transferable only by means of delivery of the relevant Global Certificate
to the Registrar in accordance with the provisions of the Registrar’s Agreement, with the form of
transfer endorsed on it duly completed and executed. Transfers of beneficial interests in the ELIs
may be effected only in an amount equal to the Minimum Transfer Amount or integral multiples
thereof in accordance with the rules and procedures for the time being of Euroclear and/or
Clearstream, Luxembourg and/or the Additional Clearing System, as the case may be.
(d)
Title. Each person who is for the time being shown in the register kept by the Registrar as entitled
to a particular number of ELIs shall be treated by the Issuer and the Registrar as the absolute
owner and holder of such number of ELIs. The expression “ELI holder” shall be construed
accordingly.
ELI Rights and Exercise Expenses
(a)
ELI Rights. Every Nominal Amount of ELIs gives each ELI holder, upon compliance with
Condition 4, the right to receive the Early Settlement Amount or, as the case may be, the Final
Settlement Payout (each as defined below), if any.
(b)
Exercise Expenses.
In the case where a settlement amount in cash is payable to an ELI holder, including payment of
the Early Settlement Amount pursuant to satisfaction of the Autocall Condition and payment of
the Nominal Amount or the Cash Equivalent of the Physical Settlement Amount (as the case may
be) upon expiry of the ELIs, the following provisions will apply:
The relevant ELI holders will be required to pay all charges or expenses including any taxes
or duties which are incurred in respect of the payment of such cash settlement amount
(“Cash Settlement Expenses”). The payment of such Cash Settlement Expenses is reflected
in the calculation of the Early Settlement Amount or Final Settlement Payout (as the case
may be).
In the case where the Final Settlement Payout is the Physical Settlement Amount, the following
provisions will apply:
The relevant ELI holders entitled to delivery of the Physical Settlement Amount will be
required to pay all charges which they incur in respect of the transfer and receipt of the
Physical Settlement Amount (excluding any fractional Shares or Units (as the case may be)
of the Worst Performing Asset on the Expiry Date which will be paid in cash in accordance
with Condition 6(e)) delivered to them, including without limitation any transferee’s stamp
duty, levies and registration charges and other expenses payable on or in respect of or in
connection with the receipt of or agreement to receive the Shares or Units (as the case may
be) to which the ELIs relate (the above charges and expenses incurred by ELI holders and
the above transferee’s expenses are together referred to as the “Physical Settlement
Expenses”).
An amount equivalent to the Physical Settlement Expenses must be paid by the ELI holder
in accordance with Condition 4.
— 146 —
C-3(f)
(c)
Mode of Settlement: Upon subscription of the ELIs, each ELI holder shall have an option to elect
for cash settlement or physical settlement if:
(1)
a Knock-in Event is not applicable (as specified in the applicable Pricing Supplement) AND
the Closing Price of the Worst Performing Asset on the Expiry Date is below its Exercise
Price and its Call Price; or
(2)
a Daily Knock-in Event is applicable (as specified in the applicable Pricing Supplement)
and such Daily Knock-in Event has occurred AND the Closing Price of the Worst
Performing Asset on the Expiry Date is below its Exercise Price and its Call Price; or
(3)
an At-Expiry Knock-in Event is applicable (as specified in the applicable Pricing
Supplement) and such At-Expiry Knock-in Event has occurred.
If the relevant ELI holder has elected for physical settlement, such ELI holder shall be deemed
to have exercised the option (the “Physical Settlement Option”) to require the Issuer (and/or
such other persons as the Issuer may appoint for this purpose) to purchase the Shares or, as the
case may be, the Units which form the Physical Settlement Amount on behalf of the relevant ELI
holder as its agent using the Cash Equivalent of the Physical Settlement Amount (converted into
the currency of the Shares or, as the case may be, the Units which form the Physical Settlement
Amount at the Exchange Rate (if applicable)) as described below and deliver such Shares or, as
the case may be, such Units to the relevant ELI holder using the method specified in Condition
4(f). Subject to receipt by the Issuer of notice no later than 4:00 p.m. (Hong Kong time) on the
third Business Day before the Expiry Date from the relevant ELI holder to the contrary, the Issuer
(and/or such other persons as the Issuer may appoint for this purpose) as the agent of the relevant
ELI holder and on its behalf, shall purchase, on the Expiry Date and using the Cash Equivalent
of the Physical Settlement Amount (converted into the currency of the Shares or, as the case may
be, the Units which form the Physical Settlement Amount at the Exchange Rate (if applicable)),
the Shares or, as the case may be, the Units which form the Physical Settlement Amount (subject
to adjustment as provided in Condition 6) and (subject to Condition 4(f)) deliver the Physical
Settlement Amount to the relevant ELI holder on the Settlement Date using the method specified
in Condition 4(f).
If the relevant ELI holder has elected for cash settlement, the Issuer shall pay to the relevant ELI
holder the Cash Equivalent of the Physical Settlement Amount in accordance with Condition 4(e).
(d)
Definitions. For the purposes of these Conditions:
An “At-Expiry Knock-in Event” occurs if, on the Expiry Date (for the purpose of this definition,
the “Knock-in Event Date”), the Closing Price of the Worst Performing Asset on such date is at
or below its Knock-in Price. The applicable Pricing Supplement will specify whether an
At-Expiry Knock-in Event is applicable. If the Knock-in Event Date is a Disrupted Day in respect
of a Share or, as the case may be, a Unit, the Knock-in Event Date for each Share or Unit not
affected by the occurrence of a Disrupted Day shall be the originally scheduled Knock-in Event
Date, and the Knock-in Event Date for each Share or Unit affected by the occurrence of a
Disrupted Day shall be the first succeeding Scheduled Trading Day that is not a Disrupted Day
relating to that Share or Unit, unless each of the eight Scheduled Trading Days immediately
following the originally scheduled Knock-in Event Date is a Disrupted Day relating to the
affected Share or Unit. In that case, (i) that eighth Scheduled Trading Day shall be deemed to be
the Knock-in Event Date for the affected Share or Unit, notwithstanding the fact that such day is
a Disrupted Day, and (ii) the Issuer shall determine (based on, among other things, the last
reported price of the affected reference asset and prevailing market conditions) the price of the
affected Share or Unit (as the case may be) on the Knock-in Event Date in accordance with its
good faith estimate and acting in a commercially reasonable manner and such price shall be the
Closing Price of that Share or Unit as of the Valuation Time on that eighth Scheduled Trading
Day;
“Autocall Condition” is deemed to be satisfied on a Call Date if the Closing Price of the Worst
Performing Asset on such Call Date is at or above its Call Price;
“Business Day” means a day (excluding Saturdays and Sundays) on which commercial banks and
foreign exchange markets are open for business in the relevant Business Day Centre(s);
— 147 —
“Business Day Centre(s)” means such cities as specified in the applicable Pricing Supplement;
“Calculation Period” means each successive period from (but excluding) a Calculation Period
Start Date to (and including) the next succeeding Calculation Period End Date. For the avoidance
of doubt and for the purpose of determining “Total Days”, the relevant Calculation Period Start
Date and the relevant Calculation Period End Date shall not be adjusted if it is a Disrupted Day.
“Calculation Period End Date” means each Scheduled Calculation Period End Date or, if any
such date is not a Scheduled Trading Day, the following Scheduled Trading Day. Provided that,
if any such day is a Disrupted Day, the relevant Calculation Period End Date for each Share or
Unit not affected by the occurrence of a Disrupted Day shall be the original Scheduled
Calculation Period End Date, and the Calculation Period End Date for each Share or Unit affected
by the occurrence of a Disrupted Day shall be the first succeeding Scheduled Trading Day that
is not a Disrupted Day relating to the affected Share or Unit, unless each of the eight Scheduled
Trading Days immediately following the original Scheduled Calculation Period End Date is a
Disrupted Day relating to the affected Share or Unit. In that case:
(1)
that eighth Scheduled Trading Day shall be deemed to be the Calculation Period End Date
for the affected Share or Unit, notwithstanding the fact that such day is a Disrupted Day;
and
(2)
the Issuer shall determine (based on, among other things, the last reported price of the
affected reference asset and prevailing market conditions) the price of the affected Share or
Unit (as the case may be) on the Calculation Period End Date in accordance with its good
faith estimate and acting in a commercially reasonable manner and such price shall be the
Closing Price of that Share or Unit as of the Valuation Time on that eighth Scheduled
Trading Day;
“Calculation Period Start Date” means each date specified in the applicable Pricing Supplement
or, if any such date is not a scheduled Trading Day, the following Scheduled Trading Day.
“Call Date” means each date specified in the applicable Pricing Supplement or, if any such date
is not a scheduled Trading Day, the following Scheduled Trading Day. Provided that if any such
day is a Disrupted Day in respect of a Share or Unit, such Call Date for each Share or Unit not
affected by the occurrence of a Disrupted Day shall be the originally scheduled Call Date, and
such Call Date for each Share or Unit affected by the occurrence of a Disrupted Day shall be the
first succeeding Scheduled Trading Day that is not a Disrupted Day relating to that Share or Unit,
unless each of the eight Scheduled Trading Days immediately following the originally scheduled
Call Date is a Disrupted Day relating to the affected Share or Unit. In that case:
(i)
that eighth Scheduled Trading Day shall be deemed to be such Call Date for the affected
Share or Unit, notwithstanding the fact that such day is a Disrupted Day; and
(ii)
the Issuer shall determine (based on, among other things, the last reported price of the
affected reference asset and prevailing market conditions) the price of the affected Share or
Unit (as the case may be) on the Call Date in accordance with its good faith estimate and
acting in a commercially reasonable manner and such price shall be the Closing Price of that
Share or Unit as of the Valuation Time on that eighth Scheduled Trading Day.
“Call Price” means, subject to adjustments in accordance with Condition 6, in respect of a Share
or, as the case may be, a Unit, a specified percentage of the Initial Spot Price of such Share or
Unit as set out in the applicable Pricing Supplement;
— 148 —
“Cash Equivalent of the Physical Settlement Amount” means, in respect of every Nominal
Amount of an ELI, a cash amount in the Settlement Currency determined in accordance with the
following formula (rounded up to 2 decimal places, with 0.005 or above being rounded upwards),
less Cash Settlement Expenses:
Nominal Amount
Exercise Price of the
Worst Performing
Asset on the Expiry Date
x
Closing Price of the Worst
Performing Asset on
the Expiry Date
“Clearance System” means, in relation to a series of ELIs, the Central Clearing and Settlement
System established and operated by Hong Kong Securities Clearing Company Limited or such
other applicable clearance system through which transfers of the Shares or, the Units which form
the Physical Settlement Amount, as the case may be, are customarily settled as approved by the
Issuer, or any successor to such clearance system;
“Clearance System Business Day” means, in respect of a Clearance System, any day on which
such Clearance System is (or, but for the occurrence of a Settlement Disruption Event, would have
been) open for the acceptance and execution of settlement instructions;
“Closing Price” means, subject to adjustment in accordance with Condition 6, in respect of a
Scheduled Trading Day, the closing price as at the Valuation Time on such day of one Share or,
as the case may be, one Unit as quoted on the Exchange without regard to any subsequently
published correction as determined by or on behalf of the Issuer;
“Day-in Cash Dividend Rate” means such rate as specified in the applicable Pricing
Supplement;
“Day-out Cash Dividend Rate” means such rate as specified in the applicable Pricing
Supplement;
“Days In” means the total number of Scheduled Trading Days during the relevant Calculation
Period (or, if the Autocall Condition is satisfied, the period from (but excluding) the relevant
Calculation Period Start Date immediately preceding the Call Date on which the Autocall
Condition is satisfied to (and including) the relevant Call Date), on which the Closing Price of the
Worst Performing Asset (determined on each Scheduled Trading Day) is at or above its Floor
Price provided that, if any such day is a Disrupted Day, the relevant Scheduled Trading Day for
each Share or Unit not affected by the occurrence of a Disrupted Day shall be the originally
Scheduled Trading Day, and the relevant Scheduled Trading Day for each Share or Unit affected
by the occurrence of a Disrupted Day shall be the first succeeding Scheduled Trading Day which
is not a Disrupted Day relating to the affected Share or Unit, unless each of the eight Scheduled
Trading Days immediately following the original Scheduled Trading Day is a Disrupted Day
relating to the affected Share or Unit. In that case, (i) that eighth Scheduled Trading Day shall be
deemed to be the relevant Scheduled Trading Day for the affected Share or Unit, notwithstanding
the fact that such day is a Disrupted Day; and (ii) the Issuer shall determine (based on, among
other things, the last reported price of the affected reference asset and prevailing market
conditions) the price of the affected Share or Unit (as the case may be) on the relevant Scheduled
Trading Day in accordance with its good faith estimate and acting in a commercially reasonable
manner and such price shall be the Closing Price of that Share or Unit as of the Valuation Time
on that eighth Scheduled Trading Day;
“Days Out” means the total number of Scheduled Trading Days during the relevant Calculation
Period (or, if the Autocall Condition is satisfied, the period from (but excluding) the relevant
Calculation Period Start Date immediately preceding the Call Date on which the Autocall
Condition is satisfied to (and including) the relevant Call Date) on which the Closing Price of the
Worst Performing Asset (determined on each Scheduled Trading Day) is below its Floor Price
provided that, if any such day is a Disrupted Day, the relevant Scheduled Trading Day for each
Share or Unit not affected by the occurrence of a Disrupted Day shall be the originally Scheduled
Trading Day, and the relevant Scheduled Trading Day for each Share or Unit affected by the
occurrence of a Disrupted Day shall be the first succeeding Scheduled Trading Day which is not
a Disrupted Day relating to the affected Share or Unit, unless each of the eight Scheduled Trading
— 149 —
Days immediately following the original Scheduled Trading Day is a Disrupted Day relating to
the affected Share or Unit. In that case, (i) that eighth Scheduled Trading Day shall be deemed
to be the relevant Scheduled Trading Day for the affected Share or Unit, notwithstanding the fact
that such day is a Disrupted Day; and (ii) the Issuer shall determine (based on, among other
things, the last reported price of the affected reference asset and prevailing market conditions) the
price of the affected Share or Unit (as the case may be) on the relevant Scheduled Trading Day
in accordance with its good faith estimate and acting in a commercially reasonable manner and
such price shall be the Closing Price of that Share or Unit as of the Valuation Time on that eighth
Scheduled Trading Day;
A “Daily Knock-in Event” occurs if, during the Relevant Period, the Closing Price of the Worst
Performing Asset on the relevant Scheduled Trading Day (for the purpose of this definition, each
a “Knock-in Event Date”) is at or below its Knock-in Price. The applicable Pricing Supplement
will specify whether a Daily Knock-in Event is applicable. If a Knock-in Event Date is a
Disrupted Day in respect of a Share or Unit, such Knock-in Event Date for each Share or Unit
not affected by the occurrence of a Disrupted Day shall be the originally scheduled Knock-in
Event Date, and such Knock-in Event Date for each Share or Unit affected by the occurrence of
a Disrupted Day shall be the first succeeding Scheduled Trading Day that is not a Disrupted Day
relating to that Share or Unit, unless each of the eight Scheduled Trading Days immediately
following the originally scheduled Knock-in Event Date is a Disrupted Day relating to the
affected Share or Unit. In that case, (i) that eighth Scheduled Trading Day shall be deemed to be
such Knock-in Event Date for the affected Share or Unit, notwithstanding the fact that such day
is a Disrupted Day; and (ii) the Issuer shall determine (based on, among other things, the last
reported price of the affected reference asset and prevailing market conditions) the price of the
affected Share or Unit (as the case may be) on the Knock-in Event Date in accordance with its
good faith estimate and acting in a commercially reasonable manner and such price shall be the
Closing Price of that Share or Unit as of the Valuation Time on that eighth Scheduled Trading
Day;
“Disrupted Day” means any Scheduled Trading Day on which a relevant Exchange or any
Related Exchange fails to open for trading during its regular trading session or on which a Market
Disruption Event has occurred;
“Early Settlement Amount” means in respect of each ELI and a Call Date (where the ELIs have
been terminated on a Call Date pursuant to satisfaction of the Autocall Condition), an amount in
the Settlement Currency equal to the sum of the Nominal Amount plus the Potential Cash
Dividend Amount (if any) in respect of the period from (but excluding) the relevant Calculation
Period Start Date immediately preceding the Call Date on which the Autocall Condition is
satisfied up to (and including) the relevant Call Date, less Cash Settlement Expenses;
“Early Settlement Date” means the date an ELI holder will receive the Early Settlement Amount
pursuant to satisfaction of the Autocall Condition, as specified or otherwise determined as
provided in the applicable Pricing Supplement;
“Exercise Price” means, subject to adjustment in accordance with Condition 6, in respect of a
Share or, as the case may be, a Unit, a specified percentage of the Initial Spot Price of such Share
or Unit as set out in the applicable Pricing Supplement;
“Exchange” means, in respect of the Shares or, as the case may be, the Units, each exchange or
quotation system specified as such for such Shares or Units in the applicable Pricing Supplement,
any successor to such exchange or quotation system or any substitute exchange or quotation
system to which trading in the Shares or, as the case may be, the Units has temporarily relocated
(provided that the Issuer has determined in good faith and in a commercially reasonable manner
that there is comparable liquidity relative to such Shares or Units on such temporary substitute
exchange or quotation system as the original Exchange);
“Exchange Business Day” means any Scheduled Trading Day on which each Exchange and each
Related Exchange are open for trading during their respective regular trading sessions,
notwithstanding any such Exchange or Related Exchange closing prior to its Scheduled Closing
Time;
“Exchange Rate” means, if applicable, such exchange rate as specified in the relevant term sheet.
— 150 —
“Expiry Date” means the date the ELI is scheduled to terminate (where the ELIs have not been
terminated on a Call Date pursuant to satisfaction of the Autocall Condition) as specified in the
applicable Pricing Supplement, or if such day is not a Scheduled Trading Day, the immediately
succeeding Scheduled Trading Day. Provided that, if such day is a Disrupted Day in respect of
a Share or Unit, the Expiry Date for each Share or Unit not affected by the occurrence of a
Disrupted Day shall be the Scheduled Expiry Date, and the Expiry Date for each Share or Unit
affected by the occurrence of a Disrupted Day shall be the first succeeding Scheduled Trading
Day that is not a Disrupted Day relating to that Share or Unit, unless each of the eight Scheduled
Trading Days immediately following the Scheduled Expiry Date is a Disrupted Day relating to
that Share or Unit. In that case:
(1)
that eighth Scheduled Trading Day shall be deemed to be the Expiry Date for the affected
Share or Unit, notwithstanding the fact that such day is a Disrupted Day; and
(2)
the Issuer shall determine (based on, among other things, the last reported price of the
affected reference asset and prevailing market conditions) the price of the affected Share or
Unit (as the case may be) on the Expiry Date in accordance with its good faith estimate and
acting in a commercially reasonable manner and such price shall be the Closing Price of that
Share or Unit as of the Valuation Time on that eighth Scheduled Trading Day;
“Final Settlement Payout” means, in respect of each ELI and the Expiry Date (where the ELIs
have not been terminated on a Call Date pursuant to satisfaction of the Autocall Condition), the
following:
(A) Where a Knock-in Event is not applicable (as specified in the applicable Pricing
Supplement)
(B)
(i)
if the Closing Price of the Worst Performing Asset on the Expiry Date is at or above
its Exercise Price or its Call Price, an amount in the Settlement Currency calculated
by the Issuer as equal to the sum of (1) the Potential Cash Dividend Amount in respect
of the final Calculation Period (if any) and (2) the Nominal Amount, less Cash
Settlement Expenses; or
(ii)
if the Closing Price of Worst Performing Asset on the Expiry Date is below its
Exercise Price and its Call Price, either:
(a)
where the ELI holder has elected for cash settlement, an amount in the
Settlement Currency calculated by the Issuer as equal to the sum of (1) the
Potential Cash Dividend Amount in respect of the final Calculation Period (if
any) and (2) the Cash Equivalent of the Physical Settlement Amount, less Cash
Settlement Expenses; or
(b)
where the ELI holder has elected for physical settlement, a number of the Shares
or, as the case may be, the Units equal to the Physical Settlement Amount
(together with an amount in the Settlement Currency calculated by the Issuer in
respect of any Excess Lot in accordance with Condition 6(e) (subject to
adjustment as provided in Condition 6)) plus the Potential Cash Dividend
Amount in respect of the final Calculation Period (if any).
Where a Daily Knock-in Event is applicable (as specified in the applicable Pricing
Supplement)
(i)
if the Daily Knock-in Event has not occurred or the Daily Knock-in Event has
occurred but the Closing Price of the Worst Performing Asset on the Expiry Date is
at or above its Exercise Price or its Call Price, an amount in the Settlement Currency
calculated by the Issuer as equal to the sum of (1) the Potential Cash Dividend
Amount in respect of the final Calculation Period (if any) and (2) the Nominal
Amount, less Cash Settlement Expenses; or
— 151 —
(ii)
if the Daily Knock-in Event has occurred and the Closing Price of the Worst
Performing Asset on the Expiry Date is below the Exercise Price and the Call Price,
either:
(a)
where the ELI holder has elected for cash settlement, an amount in the
Settlement Currency calculated by the Issuer as equal to the sum of (1) the
Potential Cash Dividend Amount in respect of the final Calculation Period (if
any) and (2) the Cash Equivalent of the Physical Settlement Amount, less Cash
Settlement Expenses; or
(b)
where the ELI holder has elected for physical settlement, a number of the Shares
or, as the case may be, the Units equal to the Physical Settlement Amount
(together with an amount in the Settlement Currency calculated by the Issuer in
respect of any Excess Lot in accordance with Condition 6(e) (subject to
adjustment as provided in Condition 6)) plus the Potential Cash Dividend
Amount in respect of the final Calculation Period (if any).
(C) Where an At-Expiry Knock-in Event is applicable (as specified in the applicable
Pricing Supplement)
(i)
if an At-Expiry Knock-in Event has not occurred, an amount in the Settlement
Currency calculated by the Issuer as equal to the sum of (1) the Potential Cash
Dividend Amount in respect of the final Calculation Period (if any) and (2) the
Nominal Amount, less Cash Settlement Expenses; or
(ii)
if an At-Expiry Knock-in Event has occurred, either:
(a)
where the ELI holder has elected for cash settlement, an amount in the
Settlement Currency calculated by the Issuer as equal to the sum of (1) the
Potential Cash Dividend Amount in respect of the final Calculation Period (if
any) and (2) the Cash Equivalent of the Physical Settlement Amount, less Cash
Settlement Expenses; or
(b)
where the ELI holder has elected for physical settlement, a number of the Shares
or, as the case may be, the Units equal to the Physical Settlement Amount
(together with an amount in the Settlement Currency calculated by the Issuer in
respect of any Excess Lot in accordance with Condition 6(e) (subject to
adjustment as provided in Condition 6)) plus the Potential Cash Dividend
Amount in respect of the final Calculation Period (if any).
“Fixed Cash Dividend Rate” means such rate as specified in the applicable Pricing Supplement;
“Floor Price” means, subject to adjustment in accordance with Condition 6, in respect of a Share
or, as the case may be, a Unit, a specified percentage of the Initial Spot Price of such Share or
Unit as set out in the applicable Pricing Supplement;
“Initial Spot Price” means, in respect of a Share or, as the case may be, a Unit, such price as
specified in the applicable Pricing Supplement;
“Issue Date” means such date as specified in the applicable Pricing Supplement;
“Knock-in Event” means a Daily Knock-in Event or an At-Expiry Knock-in Event as specified
in the applicable Pricing Supplement;
“Knock-in Price” means, subject to adjustments in accordance with Condition 6, in respect of a
Share or, as the case may be, a Unit, a specified percentage of the Initial Spot Price of such Share
or Unit as set out in the applicable Pricing Supplement;
— 152 —
“Market Disruption Event” means, in respect of the Shares of a Company or, as the case may
be, the Units of a Fund comprising the Reference Basket:
(1)
the occurrence or existence at any time during the one hour period that ends at the relevant
Valuation Time of:
(a)
(b)
any suspension of or limitation imposed on trading by the relevant Exchange or
Related Exchange or otherwise and whether by reason of movements in price
exceeding limits permitted by the relevant Exchange or Related Exchange or
otherwise:
(i)
relating to the Shares or, as the case may be, the Units on the Exchange; or
(ii)
in futures or options contracts relating to the Shares or, as the case may be, the
Units on any relevant Related Exchange; or
any event (other than an event described in (2) below) that disrupts or impairs (as
determined by the Issuer) the ability of market participants in general (i) to effect
transactions in, or obtain market values for, the Shares or, as the case may be, the
Units on the Exchange, or (ii) to effect transactions in, or obtain market values for,
futures or options contracts relating to the Shares or, as the case may be, the Units on
any relevant Related Exchange,
which in either case the Issuer determines in its sole and absolute discretion, acting in good
faith and in a commercially reasonable manner is material; or
(2)
the closure on any Exchange Business Day of any relevant Exchange(s) or Related
Exchange(s) prior to its Scheduled Closing Time unless such earlier closing time is
announced by such Exchange(s) or such Related Exchange(s), as the case may be, at least
one hour prior to the earlier of (a) the actual closing time for the regular trading session on
such Exchange(s) or such Related Exchange(s) on such Exchange Business Day and (b) the
submission deadline for orders to be entered into the Exchange or Related Exchange system
for execution at the Valuation Time on such Exchange Business Day;
“Minimum Transfer Amount” means such number of ELI(s) as set out in the applicable Pricing
Supplement;
“Nominal Amount” means such amount as specified in the applicable Pricing Supplement;
“Physical Settlement Amount” means, in respect of each ELI, a number of Worst Performing
Asset on the Expiry Date determined in accordance with the following formula (rounded down
to the nearest whole number):
Nominal Amount (if applicable, converted
into the currency of the Worst Performing Asset
on the Expiry Date using the Exchange Rate)
Exercise Price of the Worst Performing Asset
on the Expiry Date
“Reference Basket” means the basket comprising the Shares and/or Units to which the ELIs are
linked, as specified in the applicable Pricing Supplement;
“Related Exchange” means, in relation to the Shares or, as the case may be, the Units, each
exchange or quotation system specified as such in relation to such Shares or Units in the
applicable Pricing Supplement, any successor to such exchange or quotation system or any
substitute exchange or quotation system to which trading in futures or options contracts relating
to such Shares or Units has temporarily relocated (provided that the Issuer has determined in its
sole and absolute discretion, acting in good faith and in a commercially reasonable manner that
there is comparable liquidity relative to the futures or options contracts relating to such Shares
or Units on such temporary substitute exchange or quotation system as on the original Related
— 153 —
Exchange), provided that where “All Exchanges” is specified as the Related Exchange in the
applicable Pricing Supplement, “Related Exchange” shall mean each exchange or quotation
system where trading has a material effect (as determined by the Issuer) on the overall market for
futures or options contracts relating to the Shares or, as the case may be, the Units;
“Relevant Period” means the period from (but excluding) the Trade Date to (and including) a
specified Calculation Period End Date or, as the case may be, the Expiry Date, as specified in the
applicable Pricing Supplement;
“Scheduled Calculation Period End Date” means any original date that, but for the occurrence
of an event causing a Disrupted Day, would have been a Calculation Period End Date, as specified
in the applicable Pricing Supplement.
“Scheduled Closing Time” means, in respect of an Exchange or Related Exchange and a
Scheduled Trading Day, the scheduled weekday closing time of such Exchange or Related
Exchange on such Scheduled Trading Day, without regard to after hours or any other trading
outside of the regular trading session hours;
“Scheduled Expiry Date” means any original date that, but for the occurrence of an event
causing a Disrupted Day, would have been the Expiry Date;
“Scheduled Trading Day” means any day on which each Exchange and each Related Exchange
are scheduled to be open for trading for their respective regular trading sessions;
“Settlement Currency” means such currency as specified in the applicable Pricing Supplement;
“Settlement Date” means, such date as specified in the applicable Pricing Supplement;
“Share” or “Shares” means, subject to adjustment in accordance with Condition 6, the equity
securities issued by the Company/Companies specified as such in the applicable Pricing
Supplement and related expressions shall be construed accordingly;
“Total Days” means the total number of Scheduled Trading Days in a Calculation Period,
notwithstanding the satisfaction of the Autocall Condition. For the avoidance of doubt, the
determination of “Total Days” shall not be adjusted if any Scheduled Trading Day in the relevant
Calculation Period is a Disrupted Day;
“Trade Date” means the date on which the terms of the ELI are fixed as specified in the
applicable Pricing Supplement;
“Unit” or “Units” means, subject to adjustment in accordance with Condition 6, the units issued
by the Fund(s) specified as such in the applicable Pricing Supplement and related expressions
shall be construed accordingly;
“Valuation Time” means, in relation to the Shares or, as the case may be, the Units, the
Scheduled Closing Time on the relevant Exchange on the relevant Scheduled Trading Day. If the
relevant Exchange closes prior to its Scheduled Closing Time and the specified Valuation Time
is after the actual closing time for its regular trading session, then the Valuation Time shall be
such actual closing time; and
“Worst Performing Asset” means, in respect of a Scheduled Trading Day and the Shares and/or
Units in the Reference Basket, the Share or, as the case may be, the Unit which generates the
lowest percentage calculated in accordance with the following formula:
Closing Price of the relevant Share or
Unit on the relevant Scheduled Trading Day
Initial Spot Price of the relevant Share or Unit
x 100%
(rounded to the nearest 0.0001%, with 0.00005% being rounded upwards) (the “Performance”).
— 154 —
Provided that, if more than one Share or, as the case may be, one Unit has the same lowest
Performance in respect of a Scheduled Trading Day, then the Issuer shall determine the Worst
Performing Asset in respect of such Scheduled Trading Day in its sole and absolute discretion
acting in good faith and a commercially reasonable manner.
3.
Termination of ELIs, Autocall Condition and Expiry
(a)
Termination of ELIs. The ELIs will be terminated if the Autocall Condition is satisfied on a Call
Date (regardless of whether a Knock-in Event (if applicable) has occurred). If the Autocall
Condition is not satisfied on a Call Date, the ELIs will not be terminated on a Call Date and the
ELIs will be terminated on the Expiry Date.
(b)
Procedures for Termination. The ELIs will automatically be terminated on a Call Date (if the
Autocall Condition is satisfied on such Call Date (regardless of whether a Knock-in Event (if
applicable) has occurred) or on the Expiry Date (if the Autocall Condition is not satisfied), as the
case may be, (without notice being given to the ELI holders). The ELI holders will not be required
to deliver any exercise notice and the Issuer or the Agent will pay or deliver (as the case may be)
to the ELI holders the Early Settlement Amount on the Early Settlement Date (if the Autocall
Condition is satisfied and the ELIs are early terminated on a Call Date) or the Final Settlement
Payout (if any) on the Settlement Date (if the ELIs are terminated on the Expiry Date). If the
Physical Settlement Amount is deliverable to the ELI holder, the Issuer, as the agent of the
relevant ELI holder and on its behalf, shall purchase and deliver to the ELI holder the Physical
Settlement Amount on the Settlement Date (if the ELIs are terminated on the Expiry Date), all
subject to Condition 2 and in accordance with Condition 4.
For the avoidance of doubt, where the ELIs have been terminated on a Call Date or the Expiry
Date, as the case may be, payment of the Early Settlement Amount on the Early Settlement Date
or payment or delivery (as the case may be) of the Final Settlement Payout on the Settlement Date
(as the case may be) shall constitute full and final settlement of the obligations of the Issuer with
respect to the ELIs. Subject to such payment or delivery, as the case may be, having been made,
the Issuer shall have no obligation towards the relevant ELI holder under the ELIs subsequent to
such Call Date or Expiry Date, as the case may be.
4.
Settlement of ELIs
(a)
ELIs may only be terminated in an amount equal to the Nominal Amount or integral multiples
thereof.
(b)
No requirement to deliver any notice. The ELI holders will not be required to deliver any notice
for any purpose in relation to the termination of the ELIs.
(c)
Cancellation. The Issuer will procure that the Registrar will, with effect from the Business Day
following the Call Date or the Expiry Date or such date as the ELI has been early terminated
pursuant to Condition 6 (as the case may be), remove from its register the name of the person in
respect of the ELIs which are the subject of a termination in accordance with these Conditions,
and thereby cancel the relevant ELIs.
(d)
Settlement. Subject to termination of ELIs in accordance with these Conditions, the Issuer will
make a payment or delivery (as the case may be) to the relevant ELI holder of the Early
Settlement Amount or the Final Settlement Payout (as the case may be) on the relevant Early
Settlement Date or the Settlement Date (as the case may be).
(e)
Cash Settlement. In the case where (i) the Early Settlement Amount is payable to an ELI holder
pursuant to satisfaction of the Autocall Condition or (ii) the Final Settlement Payout is equal to
payment of (a) the Potential Cash Dividend Amount in respect of the final Calculation Period and
(b) the Nominal Amount or the Cash Equivalent of the Physical Settlement Amount (as the case
may be), the Early Settlement Amount or such Final Settlement Payout (as the case may be) shall
be despatched no later than the Early Settlement Date or the Settlement Date, as the case may be,
by crediting that amount to the relevant bank account designated by the relevant ELI holder.
— 155 —
(f)
Delivery of Shares or Units.
(i)
In the case where the Final Settlement Payout is the Physical Settlement Amount, the Issuer
will procure delivery of the Worst Performing Asset which forms the Physical Settlement
Amount on the Settlement Date by way of electronic settlement through the Central
Clearing and Settlement System established and operated by Hong Kong Securities Clearing
Company Limited or such other applicable clearing system. The amount of stamp duty
payable by the relevant ELI Holder in respect of such delivery shall be calculated by the
Issuer in accordance with the then prevailing prescribed rate and provisions for stamp duty
payable by a buyer in respect of a transfer of such Worst Performing Asset.
(ii)
In order to obtain delivery of the Physical Settlement Amount, (a) all Physical Settlement
Expenses must be paid by the relevant ELI holders to the Issuer and (b) the relevant ELI
holder must notify the Issuer of such details as are required by the Issuer for the delivery
of the Physical Settlement Amount (if any) which may include account details and/or the
name and address of any person(s) into whose name evidence of the Physical Settlement
Amount is to be registered and/or any bank or agent to whom documents evidencing the
Physical Settlement Amount are to be delivered.
(iii) Subject as provided below in the case of a Settlement Disruption Event, the Issuer will
procure:
(a)
the delivery of the Worst Performing Asset which forms the Physical Settlement
Amount using the method specified in this Condition 4(f) no later than the Settlement
Date or, if such date is not a Clearance System Business Day, the following Clearance
System Business Day; and
(b)
the despatch of any cash payment of the fractional Shares or Units (as the case may
be) as described below to which the ELI holder is entitled pursuant to Condition 6(e),
if applicable, no later than the Settlement Date.
The Issuer shall determine, in its sole and absolute discretion acting in good faith and in a
commercially reasonable manner, whether or not at any time a Settlement Disruption Event has
occurred and where it determines such an event has occurred and so has prevented delivery of
Shares or, as the case may be, the Units on the original day that but for such Settlement Disruption
Event would have been the Settlement Date, then the Settlement Date will be the first succeeding
day on which delivery of such Shares or Units can take place through the relevant
ClearanceSystem unless a Settlement Disruption Event prevents settlement on each of the eight
relevant Clearance System Business Days immediately following the original date (the
“Disruption Period”) that, but for the Settlement Disruption Event, would have been the
Settlement Date. In that case, (a) if such Shares or Units can be delivered in any other
commercially reasonable manner (as determined by the Issuer in its sole and absolute discretion
acting in good faith and in a commercially reasonable manner), then such Shares or Units will be
delivered in such other commercially reasonable manner as soon as practicable and the Settlement
Date will be deemed to be the actual day on which physical delivery of such Shares or Units can
be effected through the use of such other commercially reasonable manner (which other manner
of delivery will be deemed the relevant Clearance System for the purposes of delivery of such
Shares or the Units), or (b) if such Shares or Units cannot be delivered in any other commercially
reasonable manner (as determined by the Issuer in its sole and absolute discretion acting in good
faith and in a commercially reasonable manner), then the Settlement Date will be postponed until
delivery can be effected through the relevant Clearance System or in any other commercially
reasonable manner.
For the purposes of this Condition 4(f):
“Settlement Disruption Event” in relation to the Shares or, as the case may be, the Units means
an event which the Issuer, in its sole and absolute discretion acting in good faith and in a
commercially reasonable manner, determines to be beyond its control and to be an event as a
result of which the relevant Clearance System cannot clear the transfer of such Shares or Units.
— 156 —
(g)
Intervening Period. If the Physical Settlement Amount is deliverable to the ELI holder, as from
the Expiry Date, the relevant ELI holder (or such person as he may have directed) shall become
beneficially entitled to all those rights attaching to the Shares or, as the case may be, the Units
which form the Physical Settlement Amount to be delivered in respect of such exercise to which
he would have become entitled if he had purchased such Shares or Units on the Expiry Date to
be settled through the relevant Clearance System.
Notwithstanding the foregoing, as from the Expiry Date and until such time as the relevant ELI
holder (or such person as he may have directed) is delivered the Shares or, as the case may be,
the Units which form the Physical Settlement Amount using the method specified in Condition
4(f) (the “Intervening Period”), neither the Issuer nor the Agent or their nominee shall:
(i)
be under any obligation to deliver to such ELI holder or any subsequent beneficial owner
of the Shares or, as the case may be, the Units which form the Physical Settlement Amount
any letter, certificate, notice, circular, dividend or any other document or payment
whatsoever received by the Issuer or the Agent or nominee in its capacity as the registered
holder of such Shares or Units; or
(ii)
exercise any or all rights (including voting rights) attaching to the Shares or, as the case may
be, the Units which form the Physical Settlement Amount during the Intervening Period
without the prior written consent of such ELI holder, provided that neither the Issuer nor the
Agent nor their nominee shall be under any obligation to exercise any such rights during the
Intervening Period; or
(iii) be under any liability to such ELI holder or any subsequent beneficial owner of the Shares
or, as the case may be, the Units which form the Physical Settlement Amount in respect of
any loss or damage which such ELI holder or subsequent beneficial owner may sustain or
suffer as a result, whether directly or indirectly, of the Issuer or the Agent or their nominee
being registered during such Intervening Period as legal owner of such Shares or Units.
(h)
Notwithstanding Condition 4(g) above, the Issuer shall notify each relevant ELI holder (or where
there are joint ELI holders, the first named ELI holder) appearing in the register kept by the
Registrar’s Agent by post (by air mail in the case of an address outside Hong Kong) of the receipt
by the Issuer or the Agent or their nominee during the Intervening Period of any dividend,
distribution, rights, bonus issue, shares or units (as the case may be) issued pursuant to a share
split or consolidation in respect of the Shares or, as the case may be, the Units which form the
Physical Settlement Amount beneficially owned by such ELI holder or a subsequent beneficial
owner of such Shares or Units which such ELI holder is entitled to under these Conditions.
The Issuer shall also make available as soon as reasonably practicable such dividend payment or
Shares or Units which form the Physical Settlement Amount, as the case may be, for collection
by the ELI holder or such subsequent beneficial owner of such Shares or Units from an office in
Hong Kong which shall be specified in such notification upon production of such evidence of
entitlement and identification as may reasonably be required by the Issuer.
The Issuer shall also notify each relevant ELI holder (or where there are joint ELI holders, the
first named ELI holder) appearing on the register kept by the Registrar’s Agent by post (by airmail
in the case of an address outside Hong Kong) of any right, entitlement or offer which the ELI
holder is entitled to exercise or accept under these Conditions as beneficial owner of the relevant
Shares or Units which form the Physical Settlement Amount (as the case may be) during the
Intervening Period and shall make available any document relating to such right, entitlement or
offer for collection by the relevant ELI holder, or the person to whom the relevant ELI holder
directed the Shares or Units which form the Physical Settlement Amount (as the case may be) to
be delivered, from an office in Hong Kong which shall be specified in such notification upon
production of such evidence of entitlement and identification as may reasonably be required and,
following receipt by the Issuer of written notification as may reasonably be required and, where
appropriate, any relevant payment or consideration necessary in connection with exercising or
accepting any such right, entitlement or offer from the relevant ELI holder or the person to whom
the relevant ELI holder directed the Shares or Units which form the Physical Settlement Amount
— 157 —
(as the case may be) to be delivered, the Issuer shall on behalf of the relevant ELI holder, or the
person to whom the relevant ELI holder directed the Shares or Units which form the Physical
Settlement Amount (as the case may be) to be delivered, exercise or accept such right, entitlement
or offer.
Notwithstanding anything in this Condition, in the case of the receipt by the Issuer during the
Intervening Period of an entitlement (in respect of the Shares or Units which form the Physical
Settlement Amount (as the case may be) deliverable to or at the direction of the relevant ELI
holder) which takes the form of securities issued by the Company or, as the case may be, the Fund
by way of rights (to which entitlement the relevant ELI holder is entitled under these Conditions),
the Issuer shall, as soon as reasonably practicable and:
(i)
5.
6.
(i)
in any event by no later than three Business Days following receipt by it of the relevant
entitlement from the Company or, as the case may be, the Fund, where necessary post to the
Company or, as the case may be, the Fund or its share or unit registrar an application for
the entitlement to be split as appropriate as between Shares or, as the case may be, the Units
which form the Physical Settlement Amount deliverable to the relevant different ELI
holders (or subsequent ELI holders); and
(ii)
in any event no later than three Business Days following receipt by it of the relevant
entitlement duly split as referred to in (i) above, post (by air mail in the case of an address
outside Hong Kong) all documentation (duly renounced where appropriate) received by it
relating to such entitlement to the relevant ELI holder, or the person to whom the relevant
ELI holder directed the Shares or Units which form the Physical Settlement Amount (as the
case may be) to be delivered, or (if the relevant ELI holder shall have so directed in the
relevant exercise notice) make available such documentation for collection by the relevant
ELI holder, or the person to whom the relevant ELI holder directed such Shares or Units to
be delivered, from the Transfer Office upon production of such evidence of entitlement and
identification as may reasonably be required.
Relationship of agency or trust. These Conditions shall not be construed so as to give rise to any
relationship of agency or trust between the Issuer or the Agent or their nominee and any ELI
holder in its capacity as beneficial owner of Shares or Units which form the Physical Settlement
Amount (as the case may be), or any subsequent beneficial owner of Shares or Units which form
the Physical Settlement Amount (as the case may be), during an Intervening Period and neither
the Issuer nor the Agent or their nominee shall owe any duty of a fiduciary nature to either such
ELI holder or such beneficial owner in respect of such Shares or Units.
Registrar and Agent
(a)
The initial Registrar and the Agent and the specified office of the Registrar (the “Transfer
Office”) and the Agent are set out at the end of these Conditions. The Issuer reserves the right,
subject to the appointment of a successor, at any time to vary or terminate the appointment of the
Registrar or Agent and to appoint another Registrar or Agent provided that it will at all times
maintain a Registrar and an Agent. Notice of any such termination or appointment and of any
change in the offices will be given to the ELI holders in accordance with Condition 11.
(b)
Each of the Registrar and the Agent will be acting as agents of the Issuer in respect of any ELIs
and will not assume any obligation or duty to or any relationship of agency or trust for the ELI
holders.
(c)
The register of ELI holders will be maintained outside Hong Kong by the Registrar and the
Registrar will enter or cause to be entered the name, address and banking details of the ELI
holders, the details of the ELIs held by any ELI holder including the number of ELIs of each
series held and any other particulars which it thinks proper.
Adjustments, Substitution and Early Termination
(a)
Potential Adjustment Events. The Issuer shall determine, in its sole and absolute discretion acting
in good faith and in a commercially reasonable manner, whether or not a Potential Adjustment
— 158 —
Event has occurred during the period between the Trade Date and the Expiry Date and where it
determines that such an event has occurred, the Issuer will, in its sole and absolute discretion
acting in good faith and in a commercially reasonable manner, determine whether such Potential
Adjustment Event has a diluting or concentrative effect on the theoretical value of the relevant
Shares or Units (as the case may be) and, if so, will make such adjustment, if any, to the terms
of the relevant ELIs as the Issuer determines, in its sole and absolute discretion acting in good
faith and in a commercially reasonable manner, to be appropriate to account for that diluting or
concentrative effect and to preserve the economic equivalence of the relevant ELIs. The Issuer
shall also determine, in its sole and absolute discretion acting in good faith and in a commercially
reasonable manner, the effective date(s) of such adjustment(s).
For the purposes of this Condition 6(a) and in respect of a Company or Fund (where applicable)
whose Shares or Units comprise the Reference Basket, “Potential Adjustment Event” means:
(b)
(1)
a subdivision, consolidation or reclassification of the Shares or Units (unless resulting in a
Merger Event) or a free distribution or dividend of any such Shares or Units to existing
holders whether by way of bonus, capitalisation or similar issue; or
(2)
a distribution or dividend to existing holders of the Shares or Units of (a) such Shares or
Units or (b) other share capital or securities granting the right to payment of distributions
and/or dividends and/or the proceeds of liquidation of the Company or the Fund equally or
proportionately with such payments to holders of any such Shares or Units (where
applicable) or (c) share capital or other securities of another issuer acquired or owned
(directly or indirectly) by the Company or Fund (where applicable) as a result of a spin-off
or other similar transaction or (d) any other type of securities, rights or warrants or other
assets, in any case for payment (cash or otherwise) at less than the prevailing market price
as determined by the Issuer in its sole and absolute discretion acting in good faith and in a
commercially reasonable manner; or
(3)
an extraordinary dividend; or
(4)
a call by the Company or the Fund (where applicable) in respect of the Shares or Units (as
the case may be) that are not fully paid; or
(5)
a repurchase by the Company or Fund (where applicable) or any of its subsidiaries of the
Shares or Units (as the case may be) whether out of profits or capital and whether the
consideration for such repurchase is cash, securities or otherwise; or
(6)
in respect of the Company, an event that results in any shareholder rights being distributed
or becoming separated from shares of common stock or other shares of the capital stock of
the Company, pursuant to a shareholder rights plan or arrangement directed against hostile
takeovers that provides upon the occurrence of certain events for a distribution of preferred
stock, warrants, debt instruments or stock rights at a price below their market value as
determined by the Issuer, provided that any adjustment effected as a result of such an event
shall be readjusted upon any redemption of such rights; or
(7)
any other event that may have a diluting or concentrative effect on the theoretical value of
the relevant Shares or Units (as the case may be).
Other Adjustment, Substitution or Termination Events. If, during the period between the Trade
Date and the Expiry Date, (i) a Merger Event or (ii) Tender Offer has occurred, the Issuer may
(A) make such adjustment as it, in its sole and absolute discretion acting in good faith and in a
commercially reasonable manner, determines to be appropriate, if any, to the terms of the ELIs
to account for the economic effect on the ELIs of such event and to preserve the economic
equivalence of the relevant ELIs, which may be determined by reference to the adjustment(s)
made in respect of such event by an options exchange to options on the relevant Shares or, as the
case may be, the Units of the relevant Fund traded on such options exchange and (B) determine
the effective date of that adjustment.
— 159 —
If the Issuer determines in its sole and absolute discretion acting in good faith and in a
commercially reasonable manner that any of the foregoing adjustments is not appropriate, the
Issuer will seek to replace the relevant affected Share(s) or Unit(s) with shares of another
company and/or units of another fund selected by the Issuer in its sole and absolute discretion
acting in good faith and in a commercially reasonable manner (such replacement shares or units
being the “Substitute Asset”) which meet all of the following criteria:
(i)
a share or unit of a fund listed on the same Exchange which is not already comprised in the
Reference Basket; and
(ii)
a share or unit of a fund which belongs to a similar economic sector as the affected Share(s)
or Unit(s); and
(iii) has a similar market capitalisation as the affected Share(s) or Unit(s).
If the Issuer determines in its sole and absolute discretion acting in good faith and in a
commercially reasonable manner that it is unable to find a Substitute Asset which meets all of the
above criteria, then the Issuer will seek to replace the relevant affected Share(s) or Unit(s) with
shares of another company and/or units of another fund selected by the Issuer in its sole and
absolute discretion acting in good faith and in a commercially reasonable manner which meets the
criteria of (i) and (ii) above only.
If the Issuer determines in its sole and absolute discretion acting in good faith and in a
commercially reasonable manner that replacement of the affected Shares or Units is appropriate,
the Substitute Asset shall be deemed to be a “Share” or, as the case may be, a “Unit” and the
company or the fund issuing the Substitute Asset shall be deemed to be a “Company” or, as the
case may be, a “Fund.” The Issuer may make any further adjustments to the terms of the ELIs
as the Issuer thinks fit, provided that any such substitution and adjustment is not considered by
the Issuer to be materially prejudicial to the interest of the ELI holders generally (without
considering the circumstances of any individual ELI holder or the tax or other consequences of
such adjustment in any particular jurisdiction).
If the Issuer determines in its sole and absolute discretion acting in good faith and in a
commercially reasonable manner that replacement of the affected Shares or Units is not
appropriate, the ELIs shall be terminated as of the date selected by the Issuer in its sole and
absolute discretion acting in good faith and in a commercially reasonable manner and the
entitlements of the ELI holders to each receive the Final Settlement Payout shall cease and the
Issuer’s obligations under the ELIs shall be satisfied in full upon payment of the Adjustment
Event Settlement Amount (as defined below). The Adjustment Event Settlement Amount shall be
paid to the ELI holders as soon as practicable after the date of termination of the ELIs by crediting
that amount to the relevant bank account designated by the relevant ELI holder. No Cash
Settlement Expenses will be payable for the cash payment of any Adjustment Event Settlement
Amount to the relevant ELI holder under this Condition 6(b).
If, during the period between the Trade Date and the Expiry Date, (i) a Nationalisation; (ii) an
Insolvency; (iii) a Delisting; or (iv) an Additional Disruption Event has occurred, the Issuer will
seek to replace the relevant affected Share(s) or Unit(s) with a Substitute Asset based on the same
method of selection as set out above. If the Issuer determines in its sole and absolute discretion
acting in good faith and in a commercially reasonable manner that replacement of the affected
Share(s) or Unit(s) is not appropriate, the ELIs shall be terminated as of the date selected by the
Issuer in its sole and absolute discretion acting in good faith and in a commercially reasonable
manner and the entitlements of the ELI holders to each receive the Final Settlement Payout shall
cease and the Issuer’s obligations under the ELIs shall be satisfied in full upon payment of the
Adjustment Event Settlement Amount (as defined below). The Adjustment Event Settlement
Amount shall be paid to the ELI holders as soon as practicable after the date of termination of the
ELIs by crediting that amount to the relevant bank account designated by the relevant ELI holder.
No Cash Settlement Expenses will be payable for the cash payment of any Adjustment Event
Settlement Amount to the relevant ELI holder under this Condition 6(b).
— 160 —
(c)
Definitions. For the purposes of these conditions:
“Additional Disruption Event” means each of Change in Law, Insolvency Filing, Increased Cost
of Hedging and in the case of the Fund and the Units, Fund Termination Event;
“Adjustment Event Settlement Amount” means such amount as in the opinion of the Issuer
(such opinion to be made in its sole and absolute discretion acting in good faith and in a
commercially reasonable manner) to be the fair market value for the ELIs as of the date of
termination of the ELIs (adjusted to account fully for any costs which are, or would be, incurred
by the Issuer in unwinding any underlying or related hedging and funding arrangements, all as
determined by the Issuer in its sole and absolute discretion acting in good faith and in a
commercially reasonable manner);
“Change in Law” means (i) due to the adoption of or any change in any applicable law or
regulation (including, without limitation, and any tax law), or (ii) due to the promulgation of or
any change in the interpretation by any court, tribunal or regulatory authority with competent
jurisdiction of any applicable law or regulation (including any action taken by a taxing authority),
the Issuer determines in good faith that (a) it has become illegal to hold, acquire or dispose of
Shares or the Units (as the case may be) or (b) it will incur a materially increased cost in
performing its obligations under the ELIs (including, without limitation, due to any increase in
tax liability, decrease in tax benefit or other adverse effect on its tax position);
“Delisting” means in respect of a Company whose Shares or, as the case may be, a Fund whose
Units comprise the Reference Basket, if the Exchange announces that pursuant to the rules of such
Exchange, the Shares or the Units (as the case may be) cease (or will cease) to be listed, traded
or publicly quoted on the Exchange for any reason (other than a Merger Event) and are not
immediately re-listed, re-traded or re-quoted on an exchange or quotation system located in the
same country as the Exchange;
“Fund Termination Event” means any of the following with respect to a Fund whose Units
comprise the Reference Basket:
(1)
the units of the Fund are reclassified or the index that the Fund tracks changes or the Fund
is acquired by or aggregated to another fund, whose mandate, risk-profile and/or
benchmarks is, in the sole opinion of the Issuer (acting in good faith and in a commercially
reasonable manner), different from the mandate, risk-profile and/or benchmark of the Fund
stated as of the Trade Date (or any proposal for the foregoing occurs); or
(2)
the currency unit of units of the Fund is amended in accordance with the constitutional
documents of the Fund, so that the units of the Fund on are no longer denominated in the
currency quoted as of the Trade Date; or
(3)
there is a material change in its mandate, risk profile, prospectus, statement of additional
information, articles of incorporation, investment management agreement or annual and
semi-annual report, or there is a material change in any other rule, law, regulation, similar
guideline, constitutional document, report or other document governing the investment by
the Fund of its assets since the Trade Date (in each case as determined by the Issuer in its
sole and absolute discretion acting in good faith and a commercially reasonable manner); or
(4)
any proposal to wind up the Fund or any substantive litigation by the investors in the Fund
(as determined by the Issuer in its sole and absolute discretion acting in good faith and a
commercially reasonable manner); or
(5)
any breach or violation of any strategy or investment guidelines stated in its mandate, risk
profile, prospectus, statement of additional information, articles of incorporation,
investment management agreement or annual and semi-annual report or other document
governing the investment by the Fund of its assets that is reasonably likely to affect the
value of the Units or the rights or remedies of any holders thereof (in each case as
determined by the Issuer in its sole and absolute discretion acting in good faith and a
commercially reasonable manner); or
— 161 —
(6)
(i) any cancellation, suspension or revocation of the registration or approval of the Fund or
an interest issued to or held by an investor in the Fund by any governmental, legal or
regulatory entity with authority over such Fund or such interest, (ii) any change in the legal,
tax, accounting, or regulatory treatments of the Fund or the investment adviser for the Fund
(the “Fund Adviser”) that is reasonably likely to have an adverse impact on the value of
any interest in the Fund or any investor therein (as determined by the Issuer in its sole and
absolute discretion acting in good faith and in a commercially reasonable manner), or (iii)
the Fund, the Fund Adviser or any of the fund administrator, manager, trustee or similar
person with the primary administrative responsibilities for the Fund (the “Fund
Administrator”) becoming subject to any investigation, proceeding or litigation by any
relevant governmental, legal or regulatory authority involving the alleged violation of
applicable law for any activities relating to or resulting from the operation of the Fund, the
Fund Adviser or the Fund Administrator.
“Increased Cost of Hedging” means, in the opinion of the Issuer (acting in good faith and in a
commercially reasonable manner), the Issuer or any of its affiliates (a) is unable to, after using
commercially reasonable efforts; or (b) would incur a material increase (as compared with
circumstances existing on the Trade Date) in tax, duty, expense or fee (other than brokerage
commissions) to:
(i)
acquire, establish, re-establish, substitute, maintain, unwind or dispose of any transaction or
asset it deems necessary to hedge the price risk relating to the Shares or the Units (as the
case may be) of entering into and performing its obligations with respect to the ELI; or
(ii)
realise, recover or remit the proceeds of any such transaction or asset,
provided that any such materially increased amount that is incurred due to the deterioration of the
creditworthiness of the Issuer or its affiliates shall not be deemed an Increased Cost of Hedging;
“Insolvency” means, in respect of a Company whose Shares or, as the case may be, a Fund whose
Units comprise the Reference Basket, if by reason of the voluntary or involuntary liquidation,
bankruptcy, insolvency, dissolution or winding-up of or any analogous proceeding affecting such
Company or Fund (A) all the Shares of the Company or, as the case may be, Units of the Fund
(as the case may be) are required to be transferred to a trustee, liquidator or other similar official
or (B) holders of the Shares or, as the case may be, Units become legally prohibited from
transferring them;
“Insolvency Filing” means the Company institutes or has instituted against it by a regulator,
supervisor or any similar official with primary insolvency, rehabilitative or regulatory jurisdiction
over it in the jurisdiction of its incorporation or organisation or the jurisdiction of its head or
home office, or it consents to a proceeding seeking a judgment of insolvency or bankruptcy or any
other relief under any bankruptcy or insolvency law or other similar law affecting creditors’
rights, or a petition is presented for its winding-up or liquidation by it or such regulator,
supervisor or similar official or it consents to such a petition, provided that proceedings instituted
or petitions presented by creditors and not consented to by the issuer of the Shares shall not be
deemed an Insolvency Filing;
“Merger Date” means the closing date of a Merger Event or, where a closing date cannot be
determined under the local law applicable to such Merger Event, such other date as determined
by the Issuer (acting in good faith and in a commercially reasonable manner);
“Merger Event” means in respect of the relevant Shares, any:
(1)
reclassification or change of such Shares that results in a transfer of or an irrevocable
commitment to transfer all of such Shares outstanding to another entity or person; or
(2)
consolidation, amalgamation, merger or binding share exchange of the Company with or
into another entity or person (other than a consolidation, amalgamation, merger or binding
share or unit exchange in which such Company is the continuing entity and which does not
result in any such reclassification or change of all of such Shares outstanding); or
— 162 —
(3)
takeover offer, tender offer, exchange offer, solicitation, proposal or other event by any
entity or person to purchase or otherwise obtain 100% of the outstanding Shares of the
Company that results in a transfer of or an irrevocable commitment to transfer all such
Securities (other than such Shares owned or controlled by such other entity or person); or
(4)
consolidation, amalgamation, merger or binding share or unit exchange of the Company or
its subsidiaries with or into another entity in which the Company is the continuing entity and
which does not result in a reclassification or change of all such Shares outstanding but
results in the outstanding Shares (other than Shares owned or controlled by such other
entity) immediately prior to such event collectively representing less than 50% of the
outstanding Shares immediately following such event, in each case if the Merger Date is on
or before the Expiry Date;
“Nationalisation” means in respect of a Company whose Shares or, as the case may be, a Fund
whose Units, comprise the Reference Basket, if all such Shares or Units or all the assets or
substantially all the assets of such Company or such Fund are nationalised, expropriated or are
otherwise required to be transferred to any governmental agency, authority, entity or
instrumentality thereof;
“Tender Offer” means a takeover, tender offer, exchange offer, solicitation, proposal or other
event by any entity or person that results in such entity or person purchasing, or otherwise
obtaining or having the right to obtain, by conversion or other means, greater than 10% and less
than 100% of the outstanding voting Shares of the Company or Units of the Fund (as the case may
be) as determined by the Issuer, based upon the making of filings with governmental or
self-regulatory agencies or such other information as the Issuer deems relevant, in each case if the
Tender Offer Date is on or before the Expiry Date;
“Tender Offer Date” means, in respect of a Tender Offer, the date on which voting the Shares
or Units (as the case may be) in the amount of the applicable percentage threshold are actually
purchased or otherwise obtained (as determined by the Issuer);
(d)
Notice of Adjustments and/or Substitutions or Termination. All determinations made by the Issuer
pursuant hereto will be conclusive and binding on the ELI holders. The Issuer will give, or
procure that there is given, notice as soon as practicable of any adjustment and/or substitution or
termination (as the case may be) and of the date from which such adjustment and/or substitution
is effective or the date of termination (as the case may be) and the relevant Adjustment Event
Settlement Amount, all in accordance with Condition 11.
(e)
Fractional Shares or Units. In the case where the Final Settlement Payout is the Physical
Settlement Amount, the following provisions will apply:
In respect of any fractional Shares or, as the case may be, Units (rounded to 4 decimal places, with
0.00005 or above rounded upwards) (the “Excess Lot”) resulting from the calculation of the
Physical Settlement Amount:
(i)
the Issuer shall not deliver to the relevant ELI holder and the relevant ELI holder shall cease
to be entitled to receive physical delivery of that number of fractional Shares or, as the case
may be, Units which forms the Excess Lot; and
(ii)
the relevant ELI holder shall be entitled to receive a cash amount from the Issuer (subject
to Condition 4(f)), to be paid no later than the Settlement Date in accordance with Condition
4(e)) equal to the Closing Price of the Worst Performing Asset on the Expiry Date multiplied
by the Excess Lot, (if applicable) (rounded to 2 decimal places, with $0.005 or above
rounded upwards) (converted into the Settlement Currency at the Exchange Rate where
necessary). No Cash Settlement Expenses will be payable for the cash payment of any
Excess Lot to the relevant ELI holder under this Condition 6(e).
— 163 —
7.
Potential Cash Dividend Amount
In respect of each ELI, the Issuer shall pay to the ELI holder an amount (each a “Potential Cash Dividend
Amount”) calculated by the Issuer as follows, rounded to the nearest 2 decimal places, with 0.005 or above
being rounded upwards:
(a)
in respect of (i) each Calculation Period where the Potential Cash Dividend Amount is specified as
“fixed” in the applicable Pricing Supplement or (ii) if the Autocall Condition is satisfied in such
Calculation Period, the period from (but excluding) the relevant Calculation Period Start Date
immediately preceding the Call Date on which the Autocall Condition is satisfied to (and including) the
relevant Call Date, an amount calculated by the Issuer in accordance with the following formula:
Nominal Amount x Fixed Cash Dividend Rate; and
Provided that if the ELI is terminated on a Call Date pursuant to satisfaction of the Autocall Condition,
the relevant fixed Potential Cash Dividend Amount payable in respect of the relevant Calculation
Period will be calculated on a pro-rata basis as follows:
Nominal Amount x Fixed Cash Dividend Rate x
Number of days
Total Days
Where, “Number of days” means the total number of Scheduled Trading Days from (but excluding) the
relevant Calculation Period Start Date immediately preceding the Call Date on which the Autocall
Condition is satisfied up to (and including) that Call Date.
(b)
in respect of (i) each Calculation Period where the Potential Cash Dividend Amount is specified as
“variable” in the applicable Pricing Supplement or (ii) if the Autocall Condition is satisfied in such
Calculation Period, the period from (but excluding) the relevant Calculation Period Start Date
immediately preceding the Call Date on which the Autocall Condition is satisfied to (and including) the
relevant Call Date, an amount calculated by the Issuer in accordance with the following formula:
(I) Nominal Amount x Day-in Cash Dividend Rate
Days In
Total Days
x
PLUS
(II) Nominal Amount x Day-out Cash Dividend Rate
x
Days Out
Total Days
If a Potential Cash Dividend Amount is payable, such amount will be paid on the relevant Cash Dividend
Payment Date. If the Autocall Condition is satisfied on a Call Date, the relevant Potential Cash Dividend
Amount (if any) shall be paid on the Early Settlement Date and no Potential Cash Dividend Amount will be
payable in respect of Calculation Period(s) falling after the Call Date on which the Autocall Condition is
satisfied.
8.
Purchases
The Issuer and/or any of its affiliates may at any time purchase ELIs at any price in the open market or by
tender or by private treaty. Any ELIs so purchased may be held or resold or surrendered for cancellation.
9.
Global Certificate
The ELIs are represented by the Global Certificate registered in the name of the Nominee. ELI holders will
only be entitled to definitive certificates in respect of any ELIs issued or transferred to them in the very
limited circumstances as set out in Condition 1.
— 164 —
10.
Meetings of ELI holders; Modification
(a)
Meetings of ELI holders. The Registrar’s Agreement contains provisions for convening meetings
of the ELI holders to consider any matter affecting their interests, including the sanctioning by
Extraordinary Resolution (as defined in the Registrar’s Agreement) of a modification of the
provisions of the ELIs or of the Global Certificate.
Such a meeting may be convened by the Issuer or by ELI holders holding not less than 10 per
cent. of the ELIs for the time being remaining unexercised. The quorum at any such meeting for
passing an Extraordinary Resolution will be two or more persons holding or representing not less
than 25 per cent. of the ELIs for the time being remaining unexercised, or at any adjourned
meeting two or more persons being or representing ELI holders whatever the number of ELIs so
held or represented.
A resolution will be an Extraordinary Resolution when it has been passed at a duly convened
meeting by not less than three-quarters of the votes cast by such ELI holders as, being entitled
to do so, vote in person or by proxy.
An Extraordinary Resolution passed at any meeting of the ELI holders shall be binding on all the
ELI holders, whether or not they are present at the meeting.
Resolutions can be passed in writing without a meeting of the ELI holders being held if passed
unanimously.
(b)
11.
Modification. The Issuer may, without the consent of the ELI holders, effect any modification of
the provisions of the ELIs or the Global Certificate which is of a formal, minor or technical
nature, which is made to correct an obvious error or which is necessary in order to comply with
mandatory provisions of the laws of Hong Kong (as defined below) (as determined by the Issuer
in its sole and absolute discretion acting in good faith and in a commercially reasonable manner).
Any such modification shall be binding on the ELI holders and shall be notified to them by the
Registrar before the effective date or as soon as practicable thereafter in accordance with
Condition 11.
Notices
(a)
All documents required or permitted by these Conditions to be sent to an ELI holder or to which
an ELI holder is entitled or which the Issuer shall have agreed to deliver to the ELI holder may
be delivered by hand or sent by post addressed to the ELI holder to the ELI holder’s address (or,
in the case of joint ELI holders, to the address of the first named ELI holder) appearing in the
register kept by the Registrar, and airmail post shall be used if such address is not in Hong Kong.
All documents delivered or sent in accordance with this paragraph shall be delivered or sent at
the risk of the relevant ELI holder.
(b)
All notices to ELI holders regarding ELIs in definitive form will be deemed to be validly given
if sent by mail to the holders of ELIs at their addresses appearing in the register of ELI holders
kept by the Registrar. In addition, such notices may also be published in English in one leading
English, and in Chinese in one leading Chinese, language newspaper circulating in Hong Kong.
Such notices shall be deemed to have been given on the date of the first such publication.
(c)
For so long as the ELIs are represented by the Global Certificate held on behalf of Euroclear
and/or Clearstream, Luxembourg and/or the Additional Clearing System (as the case may be),
notice may be delivered to Euroclear and/or Clearstream, Luxembourg and/or the Additional
Clearing System (as the case may be) for communication by them to the holders of the ELIs.
(d)
Notice to be given by any ELI-holder shall be in writing and given by lodging the same, together
(in the case of any ELI in definitive form) with the relevant Certificate or Certificates, with the
Registrar. Whilst any of the ELIs are represented by the Global Certificate, such notice may be
— 165 —
given by any holder of an ELI to the Registrar through Euroclear and/or Clearstream,
Luxembourg and/or the Additional Clearing System (as the case may be), in such manner as the
Registrar and Euroclear and/or Clearstream, Luxembourg and/or the Additional Clearing System,
as the case may be, may approve for this purpose.
12.
Modification of the Conditions of the ELIs in the applicable Pricing Supplement
The Conditions applicable to the ELIs may be amended and/or supplemented as set forth in the applicable
Pricing Supplement or in an annex to such Pricing Supplement.
13.
Governing Law
The ELIs, these Conditions, the Global Certificate, the Deed of Covenant and the Registrar’s Agreement will
be governed by and construed in accordance with the laws of the Hong Kong Special Administrative Region
of the People’s Republic of China (“Hong Kong”). The Issuer and each ELI holder (by its purchase of the
ELIs) shall be deemed to have submitted for all purposes in connection with the ELIs, the Global Certificate
and the Registrar’s Agreement to the non-exclusive jurisdiction of the courts of Hong Kong.
14.
Language
In the event of any inconsistency between the Chinese version of these Conditions and the English version
of these Conditions, the English version of these Conditions shall prevail.
Specified Office of the Agent
The Hongkong and Shanghai Banking Corporation Limited
Level 30
HSBC Main Building
1 Queen’s Road Central
Hong Kong
Transfer Office
The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch
21 Collyer Quay #14-01
HSBC Building
Singapore 049320
— 166 —
APPENDIX C
FORM OF PRICING SUPPLEMENT FOR THE BASKET DCDC ELIs
We set out below the form of the pricing supplement for the Basket DCDC ELIs. The pricing supplement will
be issued in the English language only for the purposes of lodgement with the relevant clearing systems and
attachment to the Global Certificate. The English version of the pricing supplement shall prevail over the
Chinese version in the event of conflict or discrepancy. A copy of the pricing supplement in the Chinese
language will be available for inspection at the offices of the arranger as set out on page 128 of this product
booklet.
The SFC takes no responsibility as to the contents of the terms of the pricing supplement as set out in this
Appendix C (the “Pricing Supplement”). SFC authorisation does not imply SFC’s endorsement of the
Conditions (as amended or supplemented by this Pricing Supplement).
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED
[number] Non-Principal Protected Unlisted Daily Cash Dividend Callable Equity Linked Investments
linked to existing issued [ordinary shares] [units] of
[par value] [unit value] each in [company] [fund] ([stock code].HK)
[and existing issued [ordinary shares] [units] of
[par value] [unit value] each in [company] [fund] ([stock code].HK)]
(the “Basket DCDC ELIs”)
issued pursuant to The Hongkong and Shanghai Banking Corporation Limited
Non-Principal Protected Unlisted Equity Linked Investment Programme (the “Programme”)
The Basket DCDC ELIs are not traded on any markets operated by Hong Kong Exchanges and
Clearing Limited or any other stock exchanges.
[date]
This document constitutes the Pricing Supplement relating to the issue of the Basket DCDC ELIs described
herein. This Pricing Supplement amends and supplements the general terms and conditions of the Basket
DCDC ELIs (the “Conditions”) as set out in Appendix B — “General Terms and Conditions of the Basket
DCDC ELIs” in the Product Booklet dated 22 July 2011 (the “Product Booklet”) [as supplemented by the
addendum dated [date] (the “Addendum”)] relating to the Programme and should be read in conjunction
with such Conditions. Terms used herein shall be deemed to be defined as such for the purposes of the
Conditions set forth in the Product Booklet [and the Addendum].
[As at the date of this Pricing Supplement, no addendum has been published in respect of the Product
Booklet.]
GENERAL TERMS
1.
Type of Equity Linked Investments:
Basket DCDC ELIs
2.
Listing Status:
Unlisted
3.
Issue Size:
[number] Basket DCDC ELIs]
4.
Trade Date:
[date]
5.
Issue Date:
[date]
6.
Series Number:
[number]
7.
Issue Price:
100% of the Nominal Amount
— 167 —
C-2(h)
8.
Expiry Date:
Expected to be [date] (the “Scheduled Expiry Date”).
9.
Early Settlement Date:
Three Business Days after the relevant Call Date on which the
Closing Prices of all the Shares and Units in the Reference
Basket are determined in accordance with the Conditions.
10.
Settlement Date:
Three Business Days after the Expiry Date on which the
Closing Prices of all the Shares and Units in the Reference
Basket are determined in accordance with the Conditions.
11.
Business Day Centre(s):
[city(ies)] in relation to (i) the Early Settlement Date; (ii) the
Settlement Date; and (iii) each Cash Dividend Payment Date
and [city(ies)] for all other dates
12.
Settlement Currency:
[currency] (“currency”)
13.
Minimum Transfer Amount:
One Basket DCDC ELI (i.e. the Nominal Amount)
14.
Other terms or special
conditions:
[Not Applicable]
[Share] [and] [Fund] Basket
DCDC ELI Provisions:
Applicable
Reference Basket:
A basket made up of [existing issued ordinary issued shares of
[per value] (each a “Share”) of a company (each a
“Company”)] [and] [existing issued units of [unit value] (each
a “Unit”) of a fund (each a “Fund”)] as shown in the table
below:
15.
[Company] [and] [Fund]
[name]
[name]
Stock Code
[stock code]
[stock code]
16.
Nominal Amount:
[currency amount], representing one Basket DCDC ELI
17.
Autocall Condition:
[Daily] [Periodic] Autocall Condition applicable.
18.
Call Price:
In respect of each [Share] [and each] [Unit], [[number] per
cent. of its Initial Spot Price, rounded to the nearest 0.0001,
with 0.00005 or above being rounded upwards]:
[Share/Unit] [currency amount]
19.
Call Date:
[Each of [dates] [[Any Scheduled Trading Day during a
Calculation Period (excluding the Expiry Date)] [Each of
[dates]] following and including the Calculation Period End
Date of the [nth] Calculation Period (excluding the Expiry
Date)].
20.
Exchange (N.B. This relates to the
[Shares] [and] [Units]):
The Stock Exchange of Hong Kong Limited
21.
Related Exchange:
[Exchange] [All Exchanges]
— 168 —
22.
Exercise Price:
In respect of each [Share] [and each] [Unit], [[number] per
cent. of its Initial Spot Price, (rounded to the nearest 0.0001
with 0.00005 or above being rounded upwards)]:
[Share/Unit] [currency amount]
23.
Initial Spot Price:
[[Share] [currency] [price]
[Share] [currency] [price]]
[[Unit] [currency] [price]]
24.
Exchange Rate:
[Not Applicable] [The mid-market exchange rate for Hong
Kong dollars per 1 Settlement Currency as per [Reuters Page
[page]] at the Valuation Time on the Expiry Date.]
25.
Knock-in Event:
[Applicable] [Not Applicable]
- Daily Knock-in Event:
[Applicable] [Not Applicable]
[“Relevant Period” means the period from (but excluding) the
Trade Date to (and including) [the [nth] Calculation Period End
Date] [the Expiry Date].]
26.
- At-Expiry Knock-in Event:
[Applicable] [Not Applicable]
Knock-in Price:
[Not Applicable] [In respect of each [Share] [and each] [Unit],
[[number] per cent. of its Initial Spot Price, rounded to the
nearest 0.0001, with 0.00005 or above being rounded
upwards]:
[Share/Unit] [currency amount]
27.
Physical Settlement Option:
Applicable
28.
Potential Cash Dividend Amount:
Calculation
Period:
29.
Floor Price:
Calculation
Period Start
Date[s]:
Scheduled
Calculation
Period End
Date[s]:
Fixed or
Variable:
[number]
[date]
[date]
[Fixed]
[Variable]
[number]
[date]
[date]
[Fixed]
[Variable]
In respect of each [Share] [and each] [Unit], [[number] per
cent. of its Initial Spot Price, rounded to the nearest 0.0001,
with 0.00005 or above being rounded upwards]:
[Share/Unit] [currency amount]
30.
Cash Dividend Payment Date:
Three Business Days after each Calculation Period End Date[,
which are expected to be [dates]].
31.
Day-in Cash Dividend Rate:
[percentage]%
32.
Day-out Cash Dividend Rate:
[percentage]%
33.
Fixed Cash Dividend Rate:
[percentage]%
— 169 —
OPERATIONAL INFORMATION
34.
Any Additional Clearing System(s)
and the relevant identification
number(s):
[Not Applicable]
[Central Clearing and Settlement System] [insert
identification number]
Delivery:
Delivery of Basket DCDC ELIs [free of] [against payment
of] issue proceeds
ISIN:
[number]
Common Code:
[number]
Signed on behalf of the Issuer:
The Hongkong and Shanghai Banking Corporation Limited
By:
Duly authorised
— 170 —
REGISTERED OFFICE OF THE ISSUER
The Hongkong and Shanghai Banking Corporation Limited
HSBC Main Building
1 Queen’s Road Central
Hong Kong
C-1(a)
ARRANGER
C-1(b)
The Hongkong and Shanghai Banking Corporation Limited
Level 15
HSBC Main Building
1 Queen’s Road Central
Hong Kong
SPECIFIED OFFICE OF THE AGENT
The Hongkong and Shanghai Banking Corporation Limited
Level 30
HSBC Main Building
1 Queen’s Road Central
Hong Kong
REGISTRAR AND TRANSFER OFFICE
The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch
21 Collyer Quay #14-01
HSBC Building
Singapore 049320
LEGAL ADVISER
To the Issuer as to Hong Kong law
Linklaters
10th Floor
Alexandra House
18 Chater Road
Hong Kong
Printed by
31372